<font color=red>2001 Mar 05 Measuring the NDX "target"
I forgot to add that while we have been comparing the Nasdaq 100 to the Nikkei of 1989/1990 for years, as a model of an unsustainable parabolic move up, there is an equally useful statistic here that might help to measure a target for the bottom. We measured this a few months back for those in the Trader's Master Class, but until today, I have not mentioned it in the public domain.
For several years we have talked about the similarity of the bullish macro-economic backdrops to both markets leading up to the blowoff highs. We predicted that there would be "no crash" in the U.S., due to the fact that, since the market is diabolical, it would simply be "too easy". Our rationale was that since most investors looked back at the Crash of 1987 as the ultimate buying opportunity, a crash on the Nasdaq would be viewed as a gold rush. Therefore, just to be contrary and dole out punishment to investors, the NDX had to grind all the way down, so that all the buy-the-dippers would lose their money $1,000 at a time, until they are all dead. I am sorry I was right, but this is the way the market works. If we always fight the last battle, we will never win the one at hand.
Chart of the Nikkei in it's heyday, and then the crash:
ottographs.com
Chart of the Nasdaq 100 in it's heyday, and then the crash:
ottographs.com
Using the Nikkei as a guide, and of course, other speculative bubbles as well, you will note that from the high to the initial low, the Nikkei lost almost 65% of it's value. Using the same calculation, the target for the NDX is 1,757. For all intents and purposes, we are nearly there.
Teresa |
