TCI Trading Signals and the NASDAQ Composite Analysis for May 2014

“Cash will be king again; it always is king in the end.”

This TCI analysis focuses on the Nasdaq Composite Index. We will examine the Nasdaq Composite and forecast its path for the coming years. But first, let’s review our previous TCI signal on GBPUSD.

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Previous TCI Forex Trading Signal

In our last trading signal published on April 28th, we forecasted an uptrend for the British Pound against the US Dollar using the TCI model.

“TCI is a technical analysis model developed entirely in-house by TradingCenter.org.”

At that time, GBPUSD was trading at 1.6845. Our target price was 1.7000, with May 6th set as the selling target date. After May 6th, we predicted a correction, as shown in the original report and the TCI table. GBPUSD actually reached 1.6956 on May 6th, 2014. After that, a strong correction began, as forecasted, pushing GBPUSD down to 1.6730 on May 14th. Now, GBPUSD trades around 1.6820. Although the 1.7000 level was nearly reached, the GBPUSD TCI signal was confirmed.

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TCI Indications on Nasdaq Composite for May 2014

As mentioned before, the real strength of TCI is its ability to predict timing. Using the TCI-Short Model (TCI v1.2), we forecast the Nasdaq Composite’s movement for May 2014. TCI points to a short-term bullish trend ending on May 27th, 2014.

■ Selling Target: 27th of May 2014

Note that May 26th, 2014, is Memorial Day, and the New York Stock Exchange will be closed.

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The Previous 2013 Nasdaq Composite Analysis – Full Confirmation by TradingCenter

One year ago, we published an analysis forecasting the strength and duration of the current Nasdaq bullish market. At that time, the Nasdaq Composite was around 3,200 points. We predicted it would likely rise to 4,150 points, with a selling target date set for the end of March 2014. Nasdaq reached 4,371 points on March 7th, 2014, before a strong correction began.

■ 52-Week Range: 3,294.95 – 4,371.70

This Nasdaq Composite forecast was confirmed. Now, let’s see what happens next.

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Nasdaq Composite – Historical Cycle

The current Nasdaq bullish market began on March 9th, 2009, at 1,265 points. Today, the Nasdaq Composite stands near 4,090 points, close to its 10-year high of 4,371.71 reached in March 2014.

From this view, Nasdaq has delivered a huge return over the past five years.

Historically, Nasdaq’s all-time high was 5,132.52 points (closing at 5,048.62) on March 10th, 2000.

■ The 2013 Nasdaq analysis includes full data on Nasdaq’s historical cycles.

Nasdaq Composite Historical Chart and TCI Long Indications

In the chart below, you can see the Nasdaq Composite’s historical movement along with the TCI Long chart (v1.2).

■ Upper Chart: Nasdaq Composite daily closing prices and the 500-day simple moving average.

■ Lower Chart: TCI-Long on Nasdaq Composite (new version v1.2 for TCI Long).

TCI-Long shows that the Nasdaq Composite has made a fair correction over the past month and is no longer overbought technically. What is concerning is the timing pattern. The long-term Nasdaq cycle appears to be nearing its end.

Stock Markets Move in Time Cycles Like Fundamentals

Stock markets tend to follow certain time cycles because fundamental factors do as well. One key reason is that interest rates also follow specific patterns. Another factor is the flow of smart money capital. When returns become excessive, investors look to take profits, which usually signals the end of bull markets.

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Conclusion – Be Careful Traders, Cash Will Be King Again

We can’t be sure if the Nasdaq Composite is starting a new bear market, but this scenario is becoming more likely. Here are some reasons:

■ The US and UK economies are slowly entering a phase of rising interest rates, likely starting in 2015. The ECB will probably raise rates too.

■ Global stock markets have delivered strong returns since 2009, leading to profit-taking.

■ Concerns about the real state of the Chinese economy are expected to grow over the next few years.

■ The crisis in Ukraine is serious and could trigger similar issues in neighboring European countries with minority conflicts.

We strongly advise stock traders to take some profits now. Don’t be greedy. Take 50% of your profits and wait to see what happens next. Cash will be king again; it always is in the end.

 

■ George Protonotarios, Financial Analyst

for TradingCenter.org, (May 19th, 2014, before opening)