NASDAQ HISTORICAL PATTERNS & FORECAST USING TCI DATA

Nasdaq: Analyzing the Bull Markets Using TCI

Nasdaq is one of the world’s most popular and active stock markets. In this analysis, we will examine the Nasdaq Composite Index since 1971 using TCI analysis. We will focus on the three bull markets of the past 20 years. Our goal is to estimate how long the current Nasdaq bull market, which began in 2009, will last. 🔗 More: » Trading Center Indicator (TCI)

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Nasdaq & TCI Charts (1971-2013)

The following multi-chart consists of three individual charts:

1) Line Chart on Nasdaq Closings since 1971 (1st in a row chart)

2) TCI Long Chart since 1971 (2nd in a row)

3) TCI Short Chart since 1971 (3rd in a row)

The Nasdaq line chart below covers the period from 1971 to 2013. The TCI charts help us better understand Nasdaq’s historic returns.

Here are some key conclusions drawn from the two TCI charts:

□ TCI LONG:

□ TCI SHORT:

Source: TradingCenter.org

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Nasdaq Historical Pattern (Last 20 Years)

Looking at the past 20 years, we can clearly see three bull markets:

1. The bull market from 1994 to 2000, which ended when the dot-com bubble suddenly burst.

2. The bull market from 2002 to 2007, which ended as US housing prices began to fall, leading to the 2008 crisis.

3. The current bull market, which started in 2009 and is expected to continue until early 2014. Why until 2014? This forecast is based on statistical analysis, which will be explained below.

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THE 3 BULL MARKETS OF THE PAST 20 YEARS –DETAILS

Here are some details concerning the duration and the performance of each of the three Nasdaq bull markets.

1st Bull Market: 9-DECEMBER 1994 / 10-MARCH 2000

Starts: December 1994: Low 710.94 (close 719.05)

Ends: 10-March 2000: High 5.132.52 (close 5,048.62)

Total Return (High-Low): 4,329.57 Points

Total Return (%): 608.99%

Duration: 1,325 Trading Days (or 5 years and 3 months)

2nd Bull Market: 10-October-2002 / 31-October 2007

Starts: 10 OCTOBER 2002: Low 1,108.49 (close 1,165.37)

Ends: 31 October 2007: High 2,861.51 (close 2,859.12)

Total Return (High-Low): 1,693.75 Points

Total Return (%): 152.8%

Duration: 1,273 Trading Days (or 5 years and 1 month)

Source: TradingCenter.org

3rd Bull Market: March 9, 2009 / Forecasting the Time Frame

The third bull market began on March 9, 2009, with a low of 1,265.50 (closing at 1,268.64).

Analysis: 

The previous two bull markets lasted about 1,300 trading days (an average of 1,325 and 1,273 days). Adding 1,300 trading days to March 9, 2009, points to early spring 2014—that is, between March and April 2014.

□ Expected End: March–April 2014. Keep in mind, this is only a statistical forecast.

Forecasting Nasdaq Peak (Point Level)

The current bull market has already surpassed the 152.8% return of the second bull market.

Calculation:

1,265.50 × 152.8% = 1,933.7 points increase

1,265.50 + 1,933.7 = 3,199.2 points

Today, Nasdaq is trading above 3,200 points.

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What to Expect Next

It’s hard to predict exactly, but an optimistic scenario seems more likely. Over the next 12 months, Nasdaq could reach 3,800 or even 4,150 points. Historical Nasdaq charts and TCI analysis suggest this rise could happen very quickly and strongly.

The Important Assumption Behind This Forecast

As mentioned before, the US economy is doing well right now and is expected to improve further in 2013. The main concerns come from Europe, where political conditions are unstable. We cannot predict what will happen politically in Europe, so we allow a 20%–30% chance that the crisis there could worsen, possibly triggering a major global economic downturn. If that happens, Nasdaq, like other markets, would crash.

 

◘ George Protonotarios, Financial Analyst

for Trading Center (April, 9th, 2013)

Forecasting Nasdaq using Historic Data