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The 2020 Tech Bubble ExplainedIf you like this analysis, please make sure to like the post, and follow for more quality content! I would also appreciate it if you could leave a comment below with some original insight. In this post, I’ll be explaining ‘The 2020 Tech Stock Bubble’ crisis, through the lens of the Dot com bubble of the 90’s. In the process, I’ll also provide educational content on technically spotting a bubble through different phases. What is a Financial Bubble? A bubble is said to have formed when equity prices rise significantly, far beyond their proper valuation, in a short period of time. Bubbles are intangible and hard to spot, but their existence is undeniable, and hard to ignore. As such, it’s important for traders and investors to manage their risk before the bubble bursts. What is the Dot-com Bubble? - The Dot-com Bubble, also known as the Internet Technology Bubble, was a rapid rise in US tech stock equity valuations fueled by retail and institutional investments in internet based companies during the late 90s. - During this bubble, we saw an exponential move in the market, in which the Nasdaq index rose from under 1,000 to over 5,000 within 5 years. - The Dot-com Bubble grew out of a combination of speculation: investing in internet tech-stocks at the time was the typical get-rich-quick scheme, as there were huge venture capital funds ready to be spent on startups with minimal substance. - Capital flew into those companies, in hopes that they’d be profitable one day, and these investments were done in an extremely bold manner, with retail investors and institutional investors both looking to maximize profits on a speculative basis. What are we seeing today? - The market we are seeing today is not moved by investors who are looking at the long term prospect of the company. The Nasdaq Index overextending well above the 20 Simple Moving Average (SMA) on the monthly demonstrates that the market is driven primarily by momentum. - After the strong ‘V shape’ recovery we witnessed from the Corona Virus (COVID-19) stock market crash, people are trying to expose themselves to the financial market with the wrong mindset- chasing the next big thing, that will make them rich quick. The general public is trying to speculate where all the money is flowing into, and they arrive at one conclusion: tech stocks. - As such, it could be said that on a bigger picture, the market’s characteristics we see today are very similar to that of the Dot-com bubble. With a clearly bullish market trend, the number of new investors who are introduced into the market increase by the day, and with the profits they witness through growth stocks (and tech stocks in particular), 30% gains in a day has become a new norm for them. However, this does not indicate that one should liquidate all their assets, and cash out before the bubble bursts. Counterarguments 1. Introduction of liquidity by the Fed The Federal Reserve has been printing money at an unprecedented rate in order to rescue the economy from the Coronavirus pandemic. As such, it’s only logical that the stock market rises at least as the same pace at which money is being supplied. The Fed’s approach towards money supply is completely different from that of the 2000’s, which is why comparing the current tech-driven bull market to the Dot-com bubble is an incorrect analogy. 2. Momentum Relating to the reason above, it could be said that momentum was introduced to the market trend ever since the Fed started actively intervening in the economy. They decided to leave the interest rates near zero, at least until 2023, which indicates that momentum could continue throughout for years. 3. Fundamentals of Tech Stocks Unlike companies of the Dot-com bubble, tech companies today demonstrate some value and substance. Amazon (AMZN) is one of the few companies that survived the Dot-com bubble burst, and later grew to become a multibillion dollar conglomerate. Arguably a tech stock, Tesla Motors (TSLA) has also shown incredible performance in their financials over the past few quarters, demonstrating substance in their rise in stock prices. Whether the current valuation of the tech giants leading the Nasdaq index today is another question. One thing that’s very clear is that with the 4th Industrial Revolution, companies in the tech field show unprecedented rates of growth and innovation, which could justify the current bull market. How to Spot a Bubble Spotting a bubble is extremely difficult, if not, impossible. Most people weren’t aware of the Dot-com bubble until they later thought about it in retrospect. However, referencing Hyman Minsky and Charles Kindleberger’s work can help us understand the structure of a bubble, and the characteristics of the market in each phase 1. Displacement Bubbles star with a shock to the system. They could be events like war, political change, technological innovation, or the introduction of a new monetary policy. A displacement creates a new opportunity for a sector of the economy, and in this case, it’s technology. 2. Boom A boom begins as optimism grows. A positive feedback loop leads to greater investment, which then leads to economic growth. Borrowers increasingly become more willing to take on debt and risk. 3. Euphoria Participants expect prices to increase at unsustainable rates, and even with a small number of people realizing there is a bubble, they continue to participate in the market thinking that they can load their assets to someone else before the market bursts. The general public begins to enter the market as media attention grows, and as individuals see their friends and acquaintances get rich. This is the phase of irrational exuberance. 4. Distress At some point, an event that causes a decline in confidence takes place. Depending on each bubble, panic can set in immediately, or could take several years to fully develop. 5. Panic When a crisis takes place, most people don’t even realize that it’s happening. Insiders and institutional investors are usually the ones to sell first. Panic is introduced into the market at retail investors all attempt to sell at the same time. This sell-off caused by panic continues until investors are convinced that cash will be made available to meet demand, leading investors to buy back in. Conclusion Despite the current stock market index highly resembling that of the Dot-com bubble era, we also have to take into account the fact that many factors that fundamentally affect the stock market have changed. Also, considering that the Dot-com bubble lasted almost 5 years, even if we could confirm that the current market trend is a bubble, it does not necessarily indicate that the bubble will burst immediately. While it’s difficult to have patience, and suppress the urge to sell at the peak, buy back in when the market bottoms, investors should realize that there is still a lot of capital that could potentially flow into the market. As such, in lieu of trying to time the top, they should be focused on the market trend’s momentum, and execute their orders based on the confirmations provided by the market.
TVC:IXICLong
by Michael_Wang_Official
13
Ready for the dead cat bounceWith the FED stepping in with its ''unlimited'' quantitative easing, the indexes and underlying components are poised for a pullback to the upside that should give a lot of hope to infvestors. Beware of this pullback as most likely in will be temporary while we wait for unemployment to spike. Short term long into long term short. see below this idea back from 2018 that showed that BA was already tremendously overvalued, what were seeing is the result of corporate greed and share buybacks. The COVID-19 fallout is nothing but a convenient scapegoat.
NYSE:BALong
by MysteriousPersian
1
Silver, Gold and now Palladium !Hey guys, your favorite bear is today interest buy the case of palladium ! Palladium shows signals of accelerated parabolic phase which tends to confirm a bubble market. Let's recap the state of the precious metals market : - Silver is in crash phase. - Gold in an advanced bearish consolidation. - Palladium in a bubble market. Technicals indicators : Price is well overextends over 200, 55, 21 and even over 7 monthly EMA : this is a strong signal of bubble. RSI shows overbought conditions on monthly chart and bearish divergences on weekly and daily. TD Sequential gives us a perfect daily 9 candlestick which implies a potential correction. DISCLAIMER : I'm not financial advisor. I'm doing it for my own entertainment. You are responsable for your losses because you trade at your own risk. PLEASE KEEP SHOWING ME YOUR SUPPORT : LIKES and follows are very HELPFUL. Feel free to comment, share and follow for receive more informations. Cheers !
NYMEX:PA1!Short
by KassandrA_dotcom
Guess What - Even More New All Time Highs Coming - Read belowEveryone knows the stock market is at record highs because the US economy is the best ever. HAHA! Coronavirus is stock market bullish. How could it be stock market bullish when considering the following: Apple is lowering earnings guidance, china's economy is hurting, and hurting US economy? Well the Coronavirus is causing China to pump 150 yuan into the market this is pushing China's market up, stock market positive. Guess who else is doing the same thing, US is pumping record amounts of cash to push this market higher. We are qe infinity and the stock market will continue to go up until the central banks that run the world decide to end it. We in a massive stock market bubble that will continue to get bigger.
TVC:SPXLong
by rjchilia123
[BTC]: Catch the last train before it takes off!As you can see we had a double bottom. TA wise: - we had strong MA crosses on the 8h timeframe (check flags) - there were lower highs (few dead cat bounces) after this local hype we had in previous months News: - Facebook's Lybra currency was an interesting catalyst in both ways - Trump tweeting about crypto got some more PR into the crypto field - Lybra might not ever see the daylight might have been shocking for some weak hands However, I firmly believe this is still whales playground where they know how to use the news and key points. It's been really interesting to see the push after the first double bottom low to 2nd dead cat high that was clearly made by big players in less than an hour! Since it's hard to play against them, it might be better to join them or even better to read them. What I read from presented zoom out graph (1day timeframe) is that we have reached the bottom. I already talked about a possible falling knife, but it would have to be some serious FUD for the cut to happen, with a strong bounce from there expected. Considering that this is less probable, I believe there is the last train that you can catch these days. As you can see from the graph fast MACD made a nice cross 2 days ago which was the buy signal, where CCI was even faster and could be used by the ones that want to play riskier. If your view is clear enough you can spot the hidden divergences on the first double bottom peak down and convergences now on the second one. Thus, I believe we won't reach 8500$ level everybody is expecting unless crazily bad news happens. Probably even not 9000$ level. The support line is clearly on the double bottom and previous peak level (around 9100). I have put short term and midterm targets for shorter time frame traders, but the real deal for the majority here is probably to buy and hold until the next hype happens. I'm 90% sure it will. Nothing in life is 100% but you have to play the odds when they are in your favor. Remember, it's just an idea. Not investing advice. ;) Take care!
KRAKEN:BTCUSDLong
by Samoto
The Bitcoin bubble Is Bitcoin just a giant bubble and is it ready to fail? Its hard to say where bitcoin will end upp in the future.. But if you have been in the trading space for a while you can clearly tell that the BTC chart look like a giant buble. We will look at the weekly chart in this analysis to get a bigger picture. History ussaly repeat itself and i have seen many Bubble charts and it does not end well.. as much as i want bitcoin to succeed i cant ignore the chart.. If you compare it to the most similar bubble chart you can clearly see that it has it similarities. And Peopel are screaming for Alt season the alts looks even worse than bitcoin.. You can tell that many are still in denial and emotional About the crypto space... Dont get me wrong i do really want bitcoin to succeed but the last bubble was diffrent and allot bigger than the past ones. Is it ever gonna go above ATH? well... i cant predict the future but i can compare it to similiar bubble charts and try to se where we are at the momment. If you look at the bio path holdings chart (BPTH) it looks extremly similiar to the BTC chart during the 2013/2014 bubble And it looks like this is the last pump before the big crash. Usally bubbles retrace 100% so if bitcoin will retrace 100% we will be back at 1200/1500 at some point.
COINBASE:BTCUSD
by MarkusBohinen
4
POINT OF CONTROL ! UPDATE (16)Traders, Here we have BTCUSD 1D chart. Previously talked about our current level (POC) here: Fundamentally, technically sentimentally, it must take his breath here to pull back to possible entry which will be a bear trap from whales and we talked about FOMO traders with weak hand are all on right now they need to be out to continue that beautiful launch. Stay tuned for an idea about mania phase and where should the price go next few weeks from now ? Like if you appreciate this. Regards, Mohsen
Short
by MohsenCapital
Contrarian Play, Bubble is about to burst SPY QQQthe market seens to be indestructible, but the thing is, market has not retest dic lows, like it dit in april 8 2018, that was real whats why markets did go to all time highs, when we have market correction in feb 1, tax cut new sell the news, now we have another story china deal but these news have already price in, the last time that i see market not let it fall to even 20 SMA, Was indeed in Jan 2018, market speculators are creating an atomic bomb with leverage, i think china is gonna unwind the devil, also, i have wathcing currencys, the dolar and yen has been manipulative like the last time we had corrections, the same thing different story,market rise faster but downside oh men, i think we will have a vix 30-50 this time. once this thing star to fall to 280 gonna go down faster to 275, i think microsoft one hit $100 in the next months,also all last rallys have low volume,im worried, but honestly even real state is all time high, market just ignore every negative news and embrace "+" just watching CNBC makes me barf. just becareful about your investment horizon, just in january apple did warning about profits, and now everything is fine? fed has created this massive bubble for years but my actual target for spy these year is 2008 and by march 2020 1999. enjoy will it last the biggest bubble in US History and is not bitcoin. So rare that the fed has decide to cut rates 2 to 0, but the economy is soaring, once those yields hit below 2% panic comes, inverted yield curve have been the most realiable source of predicting Recessions, end of economyc cycles once these bubble burst is already to late. you cant buy puts You are welcome.
AMEX:SPYShort
by Kanon8260
S&P 500 is Still a Bearish Index!Aloha, traders. This post is meant to discuss the market shock today in which the S&P 500 shot up 1.47%, an unexpected turn of events after such a confident downtrend. Upon further examination, however, this rebound should not have been unexpected; a dead cat bounce against resistance made sense. However, I expect the price to touch the top resistance at $2800 tomorrow morning before returning to its bearish trend. I still maintain that the index will crash to $2600, based on the support and resistance lines. For the time being, we are holding our short position on S&P 500, probably even shorting more if the index works up to 2800 tomorrow. Thanks for reading, leave a like if you agree!
SP:SPXShort
by nextrades
S&P 500 Demolishes Any Chance of RecoveryAloha, trader! Welcome back to another S&P update. If you've been keeping up with our posts, I noted over the weekend that traders should be watching the S&P 500 index, on the brink of a crash. This week, that crash has been playing out, destroying the 2 month bullish rally we've been seeing. Today was a big day for the index, as it needed to beat possible support at around $2755. The bears have won yet again, however, and as we predicted, S&P smashed below. We can expect further bearish price action. I still estimate the index to drop as low as $2500, but perhaps faster than I had originally imagined for such a large fund. Nevertheless, I will hold my short on the index by longing shares in SPXS. I do not expect any noticeable bounces to occur, MACD for the index is strongly indicative of more bearish action, but we've seen crazier. We've been right about the initial S&P drop, the crypto breakout and Ethereum rally, will we be correct about about a second drop for S&P? Thanks for reading, leave a like if you agree!
SP:SPXShort
by nextrades
2