Nasdaq may be poised for big gains after reaching a serious milestone, history shows
The Nasdaq Composite is performing at one of its most “miserable” levels ever and one not seen in more than a decade, according to Sundial Capital Research. The good news: It usually leaves room for an upswing. The composite was down for the fifth day in a row on Tuesday. It is down more than 30% so far this year and has also hit a new two-year low. It’s the first time these three indicators have flashed together since the recession of 2008. And it̵[ads1]7;s only the sixth time since the composite was launched in 1971. “The Nasdaq has entered elite company, joining the most miserable markets ever,” said Jason Goepfert , head of research at Sundial Capital Research, in a tweet. Sundial does business as SentimentTrader.com, where the data was posted. Bounceback Historically, the Nasdaq usually bounces back after these three conditions are met. In five previous cases, one week later, the index was always higher and the median increase 5.3%. One year later, the median gain was 20.3%, but the spread was wider, with two cases down and three up from what Goepfert called the original point of “misery.” After 2008, the gain one year later was 40.5%, while in 1973 the loss one year later was 34.3%. To be sure, there were rare times when the index would trade down during each year. But the data is consistent with the general sentiment that a bear market often—but not always—leads to a rebound. Historical points The last time these signals were triggered was in the middle of the global financial crisis, in October 2008, when they flared up twice in the same month. Before that, the three conditions were met in September 2001, shortly after the markets reopened after the 9-11 attacks; in 1974, a few weeks after President Nixon’s resignation; and in late 1973 in the midst of the Arab oil embargo that followed the Yom Kippur War. Interestingly, all six cases occurred in the last four months of the year: twice in September, three times in October and once in December.
