The Nasdaq is quietly being shredded: new data

[Hydrogen]

Underneath the surface, the tech stock heavy Nasdaq Composite is being shredded as traders fret about higher interest rates from the Federal Reserve this year.

Nearly 40% of the stocks on the exchange have been cut in half, according to new research from Sundial Capital Research's Jason Goepfert. The research firm notes this kind of trading action on the Nasdaq (^IXIC) hasn't been seen since at least 1999.

"Bulls will suggest that most of the damage has been done, and the indexes should be able to soar from here. Bears will say this is just like the internet bubble, and the index is about to "catch down" to the average stock," says Goepfert.

Some of the largest tech sell-offs have been seen in momentum favorites among traders. Streaming media player Roku has seen its stock crash 40% in the past three months, according to Yahoo Finance Plus data. Biotech Moderna is down about 30% during that same stretch.



The trading action doesn't bode well for the Nasdaq this year, Goepfert's research shows. When at least 35% of stocks are down by half on the Nasdaq, the index has been down by an average of 47%.

Top investing minds suggest the sell-off in buzzy tech names shouldn't be a surprise given the changing dynamics of Fed policy and elevated valuations.

"That's what investors should worry about is the valuation of stocks is also worrisome. In the United States, if you look at the CAPE ratio that is very elevated nearly around 35 times or so. If you look at the rest of the world, it's half of that. So the U.S. has been very, very strong. And we're at the point of kind of extremes where the valuation has been before, but it usually hasn't ended real well. And with the Fed in the reverse gear that they've been in for nearly two years now, that's going to cause headwinds for investors," bond king Jeffrey Gundlach told Yahoo Finance Live in an exclusive interview.

https://finance.yahoo.com/news/the-nasdaq-is-quietly-being-shredded-new-data-130747360.html

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Possible bear indicators for the US stock market.

There is another possibility present. Investors could be pulling their capital out of US stocks to invest in cryptocurrencies instead.

It has often been claimed that bitcoin and crypto can rival the banking industry. Is it possible that crypto could be a rival investment to stock markets as well.

If global concern relating to inflation is real. Perhaps investors are seeking assets not denominated in fiat currencies which might be susceptible to inflation.

In which case, it may not simply be bull versus bear markets. But rather a question of demand relating to inflation protected assets, in eras where inflation is becoming a concern.

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[The Sceptical Chymist]

Possible bear indicators for the US stock market.

Well, it's about time, don't you think?  The NASDAQ is higher than it's ever been after years of being just kind of meh.  Ever since 2008 or so, the entire stock market has been in a full-on raging inferno of a bull market.  If you've followed markets for any significant period of time, you know that that kind of performance isn't sustainable--especially with interest rates at 0%.  How long could they possibly stay that low?

I've been awaiting a crash or serious correction for a long time now, but it just never seems to come.  But it is coming, that I'm sure of.

There is another possibility present. Investors could be pulling their capital out of US stocks to invest in cryptocurrencies instead.

Who knows, though?  It's not like there's reliable data for that--or if there is, I'm unaware of it.  If that was the case, I'd expect bitcoin to be soaring higher than it currently is, though I guess that assumes big investors are buying it on exchanges, which they might not be.  In fact, they could be buying derivatives or what not, which wouldn't be reflected in the reported price we see.

More likely, I think, is that investors are probably holding cash or cash equivalents, waiting to buy back into the stock market once things get a little bit cheaper.  That's usually what they do.

[Hydrogen]

Who knows, though?  It's not like there's reliable data for that--or if there is, I'm unaware of it.  If that was the case, I'd expect bitcoin to be soaring higher than it currently is, though I guess that assumes big investors are buying it on exchanges, which they might not be.  In fact, they could be buying derivatives or what not, which wouldn't be reflected in the reported price we see.

More likely, I think, is that investors are probably holding cash or cash equivalents, waiting to buy back into the stock market once things get a little bit cheaper.  That's usually what they do.

We have data for residents of turkey purchasing bitcoin and tether in elevated volumes as a hedge versus inflation:

Turks pile into Bitcoin and Tether to escape plunging lira

While the lira unraveled against the dollar in the last quarter of 2021, cryptocurrency trading volumes using the lira leapt to an average $1.8 billion a day across three exchanges, according to blockchain analytics firm Chainalysis.

https://www.foxbusiness.com/economy/turks-pile-bitcoin-tether-escape-plunging-lira

https://bitcointalk.org/index.php?topic=5381282.msg58981968#msg58981968

Something similar could be occurring in the united states and other nations of the world.

Although as of yet, I have not seen published info on it.

[fiulpro]

They are undoubtedly a rival when it comes to any sort of investment but when we are talking about how the stocks are down by 20% I do think it has more to do with the fact that the US economy is crumbling and the people are scared to put their investments in there which might lead to further problems in the future. The government is not really doing well with the surge in omicron and most of the people who pulled it out might also have medical reasons considering how bad the medical care is in the US and people generally have to pay so so so much more!! Therefore I do think we cannot analyze where that money is going for sure, I think we can all blame it on the surge of cases and falling economy tho.

[kryptqnick]

If we look at the index (Nasdaq Composite), it's still quite high. I mean, it was lower in October 2021 than it is now, although not by a lot. And there's no way of knowing if the trend will continue or if the lowest point is almost reached, and then it'll start going up again. In any case, I don't think this affects Bitcoin's movements, even though sometimes the stock market seems to have similar spikes and drops with the crypto market. And the concern for inflation is real, but I don't think that this is what's causing the decrease of value on the stock market. What if it's just a correction because the value has been too high lately?

[paxmao]

Kind of yes, but not really quietly. Anyone who has some individual stocks of smaller companies can see that there are signs of "inflation" in the index, just in case there is not enough evidence looking at the FED balance sheet. It is an empirical sign of a bubble when the smaller companies start to fall, yet the larger ones still hold ATH values. It is something like the Roman Empire... you loose Britannia and then... Rome.

[ChiBitCTy]

I think it’s a simply small/short lived market correction, and not something that’s likely to last for too long. I think a lot of US stocks are over bought and this is kind of pulling things back down to earth. While I would love it if the money ends up going to cryptocurrency , I’m not so sure it will.

[mk4]

I'm not going to call it, but possibly? Lots of "growth stocks" have been been going up sky high for a while now, and they're finally getting a great healthy amount of correction.

There is another possibility present. Investors could be pulling their capital out of US stocks to invest in cryptocurrencies instead.

^This I'm definitely not going to bet on though lol. Unlikely for most people to be suddenly bullish on crypto knowing that we've been going down for a while now too as well.

[el kaka22]

I mean this is not really a problem related to stock market though, nasdaq is fine, it is about Fed and the interest rates. You always need to remind yourself, if the investment you made changed or not? If you invested into something and that thing is still the same thing and there should be no reason for it to go down then you will end up with doing fine. However, if you are not sure about the situation of the company you bought and there is a good reason for it to go down then you can be afraid.

In this case, people left because there were a lot of situation going on with the market as a whole and FED gave people high interest rate which caused investors to back out and focus on other investments which dropped the stock prices, otherwise these companies are still fine companies that did not have any proper problem that caused them to drop.

[m2017]

Possible bear indicators for the US stock market.

There is another possibility present. Investors could be pulling their capital out of US stocks to invest in cryptocurrencies instead.

It has often been claimed that bitcoin and crypto can rival the banking industry. Is it possible that crypto could be a rival investment to stock markets as well.

If global concern relating to inflation is real. Perhaps investors are seeking assets not denominated in fiat currencies which might be susceptible to inflation.

In which case, it may not simply be bull versus bear markets. But rather a question of demand relating to inflation protected assets, in eras where inflation is becoming a concern.

You are right, the indicators for the US stock market are bearish. The reason for this is the immediate plans of the Fed to increase the discount rate, which will make loans/credits more expensive, which means that less money will be poured into the economy. This in turn leads to the fact that investors invest less in the stock market.

When the discount rate is lowered, the reverse process occurs - the economy comes to life, and with it the stock market.

Investors will not move from US stocks to cryptocurrencies because these markets are connected. In the sense that if US stocks collapses, then cryptomarket collapses too. Don't forget that over the past year of the pandemic, helicopter money and cheap loans has inflated both of these markets. Now this is not the case, so the overheated markets are deflating.

[adaseb]

Most of these stocks have been crashing since last Summer. Look at stocks like PTON, ZOOM, BABA, etc. People see the stock indices hit ATH and they assume that all the stocks are doing great however it’s the completely opposite.

One reason is that stocks like Apple have a higher weight on the nasdaq, so as long as Apple is doing good, it will look like the markets are doing good but in fact that’s not the case. Today Netflix took a huge plunge and it made the nasdaq nosedive and then crypto followed.

[magneto]

The NASDAQ is insanely overvalued. Anyone with some sense can see that.

Cathie Wood and co. have pumped up the index for quite some time now and it's seriously time for adjustment. The P/E ratios on some of these stocks are absolutely insane and some are even trading pre-revenue.

Rotate into value stocks, stick to low P/E and don't buy the hype even if one or two of hundreds of the current NASDAQ stocks will take off in the long run.

[davis196]

Perhaps we should say goodbye to the "money printing machine go brrr..." era.
The Federal reserve won't stop the money printing completely,but it would stop throwing money at the US banking system and the US financial markets.
However,the US budget deficit would still have to be funded by somewhere.
The US financial market will stop "swimming in money" and many overvalued stocks will crash.
Unfortunately the cryptocurrency price will go down and we might not see another BTC ATH in the next year or two.
The current situation has proven that Bitcoin is NOT a safe heaven and a protection against inflation.
The investors will run away from the risky/volatile assets and they will start buying low risk assets with a stable value.

[Fortify]

Possible bear indicators for the US stock market.

There is another possibility present. Investors could be pulling their capital out of US stocks to invest in cryptocurrencies instead.

It has often been claimed that bitcoin and crypto can rival the banking industry. Is it possible that crypto could be a rival investment to stock markets as well.

If global concern relating to inflation is real. Perhaps investors are seeking assets not denominated in fiat currencies which might be susceptible to inflation.

In which case, it may not simply be bull versus bear markets. But rather a question of demand relating to inflation protected assets, in eras where inflation is becoming a concern.

The valuations that tech companies are sitting on have been crazy for a long time, it was inevitable these companies would face a correction. Corrections happen every 2-3 years and recessions happen roughly every 8 years, it is part of the natural cycle of boom & bust. These tech companies also benefit from the extremely low cost of debt at the moment and often use that to expand their operations, when the base rate starts to crank up it can multiply the rates they pay on that debt which is what we start to see happening now. Lots of people got rich off the colossal climb of some of these stocks, however when they swing the other way it usually affects the most greedy or people who get in late expecting the rise to continue.

[Lucius]

There is another possibility present. Investors could be pulling their capital out of US stocks to invest in cryptocurrencies instead.

Investors are very far from believing more in cryptocurrencies than in stocks, which simply will not happen in the near future, if it ever does. In addition, the moment in which the crypto market is located is very unpredictable - who can say that the price of BTC will not lose another 20% or maybe even more in value? To make matters even more unfavorable for any investor, cryptocurrencies are on very slippery ground even in the US, not to mention what is happening in some other countries of the world.

We have data for residents of turkey purchasing bitcoin and tether in elevated volumes as a hedge versus inflation:

The data show that Turks show the greatest interest in stablecoins, far more than Bitcoin or altcoins. Some may say that it is good or bad, but the fact is that those who exchanged their fiat for stablecoins did much better than those who gambled with Bitcoin (in the short term, of course).

Meanwhile, Turkey’s demand for stablecoins is much greater than traditional crypto assets such as Bitcoin and Ether.
The data showed that the stablecoin tether’s (USDT) largest fiat trading pair is Turkish Lira with 29.42 percent of USDT swaps...

Something similar could be occurring in the united states and other nations of the world.

In some other countries maybe, but do you think the US would allow people to start buying cryptocurrencies en masse? As far as I know (and this is a publicly known fact), the US defends and will defend its national currency in all possible ways - even if it means a ban on cryptocurrency trading in the US.