Nasdaq Composite Overview for Otosan
This long term trend for Nasdaq is consistent through it's history. This line has acted as the bottom for both the 1990, 2000 and 2020 crashes. The only time Nasdaq went below the line was the 2008 financial crisis. From 2008-2017 the line acted as resistance (top).
Here are the two scenarios (Long Term - Years)
Bullish: Just like the 3 major crashes - Nasdaq will test this support which shows to be around $10,000. This would be the ultimate time to buy and statistically is the more likely option. In this scenario NASDAQ will pass it's prior high in 2024 or before (50% return).
Bearish: If the $10,000 line is broken, there is no trendline and will be near impossible to predict a bottom. If we use 2007-2008 as an example, the market first dropped 20% initially (July 2007 - March 2008) and almost touched the line - the line then failed to support later that year in August. Once this line breaks after a second test or third test, all major investors dump shares as the bottom can no longer be predicted. This is why the market lost 40% from August 2008 - Feb 2009 (or a total of roughly 52% between 2007-2009). Once this happens, people should only reinvest once an uptrend starts to form. To translate this to today's market, the NASDAQ would have lost 30%+ from the tops to reach the $10,000-10,500 line, and would likely have a sharper decline to follow if the trend is broken.
Summary
Ultimately the tradeoff is either a 50% return in less than 4 years followed by a likely bull run. From strictly a statistic likely hood this is the more likely scenario. However, if NASDAQ breaks the support line, the most commonly used tool to predict bottoms (Fibonacci), the low is estimated to be around $2,875 or an additional 70% drop from $10,000 (80% drop from market high). This may seem exaggerated, but the same tool would have predicted a drop of price of the 2007-2009 bottom at $1,550 which is actually higher than the actual low of around $1,350.
Personal Conclusion
Strictly looking at chart analysis, the upside is good with the market returning to it's prior high within 4 years. However, as the recent gains were extremely fast and the following downturn was very sharp, there is also a potential of one of the greatest losses in value historically. Now if we look at the current timing and global political climate, from rising interest, supply chain disruptions to a war in Europe the risks are significantly higher than the past recessions of breaking the support line. Some of these factors can be countered by investing in companies that may counter the market for a more balanced portfolio. In short, the first priority would be to set aside enough cash (factoring for long term inflation) for the next 10-20 years outside of investment assets so that even if there is a major downturn or further inflation, you can live comfortably and stress free.
Here are the two scenarios (Long Term - Years)
Bullish: Just like the 3 major crashes - Nasdaq will test this support which shows to be around $10,000. This would be the ultimate time to buy and statistically is the more likely option. In this scenario NASDAQ will pass it's prior high in 2024 or before (50% return).
Bearish: If the $10,000 line is broken, there is no trendline and will be near impossible to predict a bottom. If we use 2007-2008 as an example, the market first dropped 20% initially (July 2007 - March 2008) and almost touched the line - the line then failed to support later that year in August. Once this line breaks after a second test or third test, all major investors dump shares as the bottom can no longer be predicted. This is why the market lost 40% from August 2008 - Feb 2009 (or a total of roughly 52% between 2007-2009). Once this happens, people should only reinvest once an uptrend starts to form. To translate this to today's market, the NASDAQ would have lost 30%+ from the tops to reach the $10,000-10,500 line, and would likely have a sharper decline to follow if the trend is broken.
Summary
Ultimately the tradeoff is either a 50% return in less than 4 years followed by a likely bull run. From strictly a statistic likely hood this is the more likely scenario. However, if NASDAQ breaks the support line, the most commonly used tool to predict bottoms (Fibonacci), the low is estimated to be around $2,875 or an additional 70% drop from $10,000 (80% drop from market high). This may seem exaggerated, but the same tool would have predicted a drop of price of the 2007-2009 bottom at $1,550 which is actually higher than the actual low of around $1,350.
Personal Conclusion
Strictly looking at chart analysis, the upside is good with the market returning to it's prior high within 4 years. However, as the recent gains were extremely fast and the following downturn was very sharp, there is also a potential of one of the greatest losses in value historically. Now if we look at the current timing and global political climate, from rising interest, supply chain disruptions to a war in Europe the risks are significantly higher than the past recessions of breaking the support line. Some of these factors can be countered by investing in companies that may counter the market for a more balanced portfolio. In short, the first priority would be to set aside enough cash (factoring for long term inflation) for the next 10-20 years outside of investment assets so that even if there is a major downturn or further inflation, you can live comfortably and stress free.
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