NASDAQ: Some Historical Insights into Techno-Mania

By Elliott Wave International

No doubt, you’ve heard: The tech-heavy Nasdaq Composite just passed the 10-thousand mark for the first-time ever, even as the DJIA remains below its February high.

This infatuation with technology is nothing new.

Indeed, EWI’s publications have long noted that the most important peaks of the past 200 years have been associated with periods of intense technological advance.

As far back as the 1835 peak, market participants were enamored with electricity, photography, blast furnaces for the mass production of iron and indoor plumbing. In 1929, investors placed their hopes on commercial air flight and radio. In 1966, futurists were envisioning colonies on the Moon. And, in the year 2000, the shares of internet companies were skyrocketing.

At the time, our January 2000 Elliott Wave Financial Forecast, a monthly publication which provides analysis and forecasts for major U.S. financial markets, offered the following assessment of the technology sector:

In a bear market, reason, technology and science do not get the same respect. The prominence of its recent veneration suggests that a flight from them may be just around the corner.

As the chart shows, the NASDAQ topped in March 2000 — two months after the January 2000 peak in the DJIA — and declined 78% over the next 31 months.

The same topping sequence happened at the October 2007 peak on a shorter-term time basis. The Dow peaked on October 11, 2007 and the NASDAQ held up for several more weeks, topping on October 31, 2007. The market then declined more than 55% until March 2009.

How about here in mid-2020? Are investors facing another top in the technology sector?

After all, the DJIA peaked in February while the Nasdaq Composite just hit an all-time high.

Of course, it remains to be seen whether the current juncture unfolds in the same way.

Yet, Elliott Wave International’s June 8 U.S. Short Term Update, a thrice weekly publication which provides near-term forecasts for key U.S. financial markets, provided this insight:

History shows the NASDAQ topping last at the end of strong rallies.

Right now, EWI’s analysts are discussing an Elliott wave formation in the NASDAQ’s price chart.

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This article was syndicated by Elliott Wave International and was originally published under the headline NASDAQ: Some Historical Insights into Techno-Mania. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.