The technology index Nasdaq has a very powerful chart setup. The Nasdaq long term chart on 20 years has a breath taking rising channel that started at the lows of March 2009. Not often in history will we see this type of perfect uptrend. Investors better get the maximum profits out of this uptrend especially in 2020 because we expect stocks to do very well. We discussed this in great detail in a few market forecasts for 2020: our Dow Jones forecast for 2020 and 2021 (32,000 Points), our stock market forecasting cycle predicts a bull market in 2020, and our top biotechnology stocks forecast for 2020.
Let’s first review how not to look at the Nasdaq, followed by what we consider the right way to look at the Nasdaq. Obviously we’ll start with some typical investor behavior which is based on checking news, listening to gurus and obsessively checking financial media.
We conclude with this: the Nasdaq long term chart on 20 years has lots of the insights that investors should work with, for those that are able and willing to identify the real message.
Nasdaq news, the lagging indicator
One of the most important risks that investors face is checking short term oriented news. It is a very bad habit because it has the potential to destroy your profit potential.
We keep on repeating that the chart IS the news. This also applies to the Nasdaq: carefully looking at the Nasdaq long term chart on 20 years will reveal THE important news. But more on that in the next chapter.
There is nothing inherently wrong with the news per se. When markets are stable, and trending in a certain direction, this really is not going to meaningfully feel bad.
The big problem starts when markets are volatile, especially during trend changes or market rotation. That’s when this habit of relying on news will prove to be catastrophic.
Again, during volatile times, these headlines will be very different, and very inviting to create a perception that will lead to a (horribly) wrong investing decision.
Similarly, the Nasdaq forecast outlined here makes us believe that short term data points will help us understand where the Nasdaq is trending. Not very helpful during volatile times, nor for long term investing decisions!
Nasdaq long term chart on 20 years, leading indicator
If news is irrelevant, even misleading, then we have to rely on the chart(s). The monthly chart shows the most dominant pattern(s) which is why we choose to only feature the Nasdaq long term chart on 20 years in this article.The dominant trend on the #Nasdaq 20 years chart is pretty interesting: a powerful rising channel since 2009 which doesn't seem to have any appetite to stop rising until (at a minimum) 10,000 points. Technology #stocks will rock… Click To Tweet
Interestingly we see a very similar setup as explained in our article about the Dow Jones long term chart on 20 years. It is this rising channel that started in 2009.
A few observations from this long term Nasdaq chart on 20 years:
- The rising channel that started in 2009 was rising very fast initially, and moved to the lower part of this channel in 2016.
- The Nasdaq reached new all time highs in 2016. That’s when it took out the previous highs of the dotcom bubble in March 2000. Similarly the Dow Jones took out all time highs but a few years earlier (2013).
- On the highest level we see a first rising support leg between 2002 and 2009 (just connect the lows similar to what we annotated on below chart). Since then there is an accelerated support leg.
- What this previous point may suggest is some sort of blow off top. It’s not a given, but we can’t exclude it neither. Don’t consider this a forecast but rather a possibility.
- Last but not least there is a clear attempt of the Nasdaq index to move to the 10,000 mark where it probably will find some acceleration (hype) or a serious resistance.
Going forward the 10,000 points test is probably THE big theme on this 20 year chart. We believe we have to carefully look at broad markets and intermarket dynamics to understand if 10k will be major resistance or a catalyst to unleash FOMO buying.