Nasdaq's Stellar Returns, Potential Risks AheadThe Nasdaq-100 has been a stellar performer since its debut in 1985, rising 22,900% (with dividends reinvested) for a 14.8% compounded annual total rate of return. By comparison, the S&P 500 returned 7,200% over the same period with dividends reinvested, an 11.5% compounded return (Figure 1).
Figure 1: Since the inception of the Nasdaq-100 index in 1985, it has outperformed the S&P
Source: Bloomberg Professional (XNDX and SPXT)
However, the Nasdaq’s outperformance can partly be attributed to higher risk levels. It has been consistently more volatile than the S&P 500 (Figure 2) and has been subject to much greater drawdowns. On March 28, 2000, Nasdaq began a drawdown that reached -81.76% on August 5, 2002 (Figure 3). The total return index didn’t hit a new high-water mark until February 12, 2015. It also had a sharper drawdown during the 2022 bear market.
Figure 2: The Nasdaq-100 has nearly always been more volatile than the S&P 500
Source: Bloomberg Professional (XNDX and SPXT), CME Economic Research Calculations
Figure 3: From 2000 to 2002, the Nasdaq-100 fell by nearly 82% and didn’t recover until 2015.
Source: Bloomberg Professional (XNDX and SPXT), CME Economic Research Calculations
A large part of the reason for the Nasdaq’s greater overall return, higher volatility and its heightened susceptibility to deep and long drawdowns is its dependence on one sector: information technology. Since at least the 1990s, Nasdaq has been nearly synonymous with the tech sector.
While nearly every sector has at least some presence in the Nasdaq, since its launch in 1999 it has always had a near-perfect correlation with the S&P 500 Information Technology Index (the basis for the S&P E-Mini Technology Select Sector futures launched in 2011). That correlation has never fallen below +0.9 and has sometimes been as high as +0.98. In the past 12 months the correlation has been +0.95 (Figure 4).
Figure 4: The Nasdaq-100 has always had extremely high correlations with the tech sector
Source: Bloomberg Professional (NDX, S5INFT, S5UTIL, S5ENRS, S5FINL, S5HLTH, S5CONS, S5COND, S5MATR, S5INDU, S5TELS)
The preponderance of technology stocks in the Nasdaq is largely a function of history. Nasdaq was founded in 1971 as the world’s first electronic stock market and it began to attract technology companies, in part, because it had more flexible listing requirements regarding revenue and profitability than other venues. Over time the technology ecosystem settled largely on this market and came to dominate the Nasdaq-100 Index.
Those who need to minimize tracking risks with respect to the S&P 500 Information Technology Index can do so with the Select Sector futures. However, those who wish to increase or decrease exposure to the technology sector more generally, and for whom tracking risks is a less of a concern can easily increase or reduce their exposure with the Nasdaq-100 futures.
Also launched in June 1999 were E-mini Nasdaq-100 futures, which are now turning 25 years old. The contracts caught on quickly, and today trade at more than 668K contracts or $60 billion in notional value each day.
E-mini Nasdaq-100 futures offer capital-efficient exposure to the Nasdaq-100 index, and allow investors to trade and track one NQ futures contract versus 100 stocks to achieve nearly identical exposure. These futures also help mitigate risk against the top-heavy nature of the Nasdaq-100 index, where the so-called Magnificent Seven companies—Microsoft, Apple, Nvidia, Amazon.com, Meta Platforms, Google-parent Alphabet and Tesla—have dominated recently. Broad exposure to this index acts as a hedge if the Magnificent Seven stocks decline.
The Nasdaq has also correlated highly in recent years with consumer discretionary stocks as well as telecoms. By contrast, it has typically low correlations with traditional high-dividend sectors such as consumer staples, energy and utilities which tend to be listed on other exchanges. The exception to this rule is during down markets, when stocks tend to become more highly correlated.
The Nasdaq also has very different interest rate sensitivities than its peers. For starters, high short-term interest rates seem to benefit the Nasdaq-100 companies as many of them have large reserves of cash that are earning high rates of return by sitting in T-Bills and other short-term maturities. This is a sharp contrast to the Russell 2000 index, which has suffered as Federal Reserve (Fed) rate hikes have increased the cost of financing for smaller and mid-sized firms, which borrow from banks rather than bond holders and don’t usually have substantial cash reserves.
By contrast, the Nasdaq has shown a very negative sensitivity to higher long-term bond yields. Many of the technology stocks in the Nasdaq-100 are trading at high earnings multiples. Some have market capitalization exceeding $1 trillion. Higher long-term bond yields are a potential threat because much the value of these corporations is what equity analysts might refer to as their “value in perpetuity,” meaning beyond any reasonable forecast horizon. Typically, such earnings are discounted using long-term bond yields and the higher those yields go, the lower the net present value of those future earnings. Additionally, higher long-term bond yields can also induce investors to switch out of highly volatile and expensive equity portfolios into the relatively less volatile, fixed- income securities.
The Nasdaq’s high sensitivity to long-term bond yields may explain why the index sold off so sharply in 2022 alongside a steep fall in the price of long-dated U.S. Treasuries, whose yields were rising in anticipation of Fed tightening and due to concerns about the persistence of inflation. By contrast, the Nasdaq has done well since October 2022 despite the Fed continuing to raise short-term rates through July 2023 and subsequently keeping those rates high. On the one hand, many of the cash-rich Nasdaq companies are benefitting from higher returns on their holdings of short-term securities. On the other hand, they are also benefitting from the fact that higher short-term rates have steadied long-term bond yields by making it clear that the Fed is taking inflation seriously.
This isn’t to suggest that the Nasdaq is immune from downside risks. History shows that the risks are very real, especially in the event of an economic downturn. In the 2001 tech wreck recession, the Fed cut short-term rates from 6.5% to 1% but long-term bond yields remained relatively high, which was not a helpful combination for the tech sector. In addition to its 82% decline during the tech wreck recession, it also fell sharply during the global financial crisis, though not as badly as the S&P 500, which had a far larger weighting to bank stocks.
This time around, potential threats to the Nasdaq include:
The possibility of an economic downturn which could crimp corporate profits.
Rate cuts which would reduce the return on cash positions.
Large budget deficits and quantitative tightening which could push up long-term bond yields.
Possibly tighter regulation of the tech sector in the U.S. and abroad.
If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
By Erik Norland, Executive Director and Senior Economist, CME Group
*CME Group futures are not suitable for all investors and involve the risk of loss. Copyright © 2023 CME Group Inc.
**All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
MNQ1! trade ideas
7/10 To Soar or Not to Soar Is the Question .GREATTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT MORNING YALLLLLLLLLLLLLLLLLLLLLLLLLLLLLLL!!!!!
😏 😏 😏
07/10/2024
**News** ON THE BLOCK TODAY!!!!
**~~Wholesale Inventories (Preliminary)~~**
10:00 AM ET
***EIA Petroleum Status Report***
10:30 AM ET
***Midnight*** **CONSENTRATED CONSOLIDATION **
*#ES 5634.25*
*#NQ 20709.50*
💰 **BUYSIDE**💰
***#ES 5646.5***.--->Above this level we look for --->....
🟢 5653.25
🟢 5676.85
🟢 5694.75
🟢 5711.25
🟢 5727.50
🟢 5738.25
***#NQ 20772.00***...---> Above this level we look for-->
🟢 20788.50
🟢 20813.00
🟢 20843.75
🟢 20878.00
🟢 20902.25
🟢 20933.25
💰 **SELLSIDE**💰
***#ES 5630***--- Below this level and we look for
🔴 5616.75
🔴 5604
🔴 5580
🔴 5564.50
🔴 5550.25
***#NQ 20696.50***---> Below this level and we look for
🔴 20685
🔴 20656
🔴 20639
🔴 20619
🔴 20594
UpdatedWe might have a sell today. I'm waiting to see what the market will do after this high. I will keep you updated. Take care
Today's analysisThat's the analysis for today. We also have high impact news so try to be careful and watch how you trade.
NQ Power Range Report with FIB Ext - 7/10/2024 SessionCME_MINI:NQU2024
- PR High: 20700.25
- PR Low: 20684.50
- NZ Spread: 35.25
Key economic calendar events
10:00 | Fed Chair Powell Testifies
10:30 | Crude Oil Inventories
13:00 | 10-Year Note Auction
Relatively mild response from ATH lift prev session
Evening Stats (As of 10:45 PM 7/9)
- Weekend Gap: N/A
- Gap 10/30/23 +0.47% (open < 14272)
- Session Open ATR: 234.82
- Volume: 12K
- Open Int: 265K
- Trend Grade: Bull
- From BA ATH: -0.3% (Rounded)
Key Levels (Rounded - Think of these as ranges)
- Long: 20954
- Mid: 19814
- Short: 18675
Keep in mind this is not speculation or a prediction. Only a report of the Power Range with Fib extensions for target hunting. Do your DD! You determine your risk tolerance. You are fully capable of making your own decisions.
BA: Back Adjusted
BuZ/BeZ: Bull Zone / Bear Zone
NZ: Neutral Zone
NASDAQ - BUY
Powell had a talk a few hours ago NY Session
Everything he said was claiming this and on the other hand that.
Made no sense to me and it should do.
They keeping rates the same until they see a substantial move towards 2% inflation LOL
As soon as they lower rates Inflation will go back up it is an un-winable game they play.
But the Market plays along and if Interest rates go Down Stocks go up and rates haven't even started coming down yet for USA but they have for
EUR
CAD
CHF
So that might be fuelling the current run
Can i suggest Buy any dips (Forget BTC OMG!) but give yourself plenty of room they need your money to go higher so they are spiking taking out stops.
Either they Stop u out or Squeeze u out on Margin the Algoes know exactly where 90% of most stops are and what pain most tarders can bare too the pip.
I have set Stop to a Swing Failure given by a LuxAlgo indicator with 1.5 Risk Reward as end of the day the Nasdaq only ever goes up did i say forget BTC.
Here are seven reasons why the Nasdaq will return to all-time highs:
Future lower interest rates generally stimulate economic activity, boosting stock market performance, particularly growth stocks in the Nasdaq.
Decreasing inflation alleviates pressure on the Federal Reserve to maintain high interest rates, positively affecting stock market sentiment.
The Federal Reserve's commitment to maintaining economic stability boosts confidence in economic policies and drives investor sentiment positively.
Strong earnings reports from companies in the Nasdaq, especially in the technology sector, can attract more investors as economic conditions stabilize.
The Nasdaq is heavily weighted with tech companies that continue to innovate and grow, attracting investments and driving stock prices higher as new technologies gain traction.
A recovering global economy can boost the performance of multinational companies in the Nasdaq, with stabilizing global markets increasing demand for tech products and services.
The Federal Reserve's potential to provide further monetary support if needed reassures investors that liquidity will remain ample, helping to sustain and drive stock market rallies.
These factors combined create a conducive environment for the Nasdaq to aim for new highs.
imho : )
NQ BreakoutNQ held a previous low after briefly breaking below earlier and has a bull flag/falling wedge. VX is still making new all time lows, so I think dip buying should be the play for now. Not much time left in the session today so maybe not worth it. We'll see how it turns out, I'd expect either chop or a slow grind up into close.
7/9 UPDATE--> MEETINGStarted off strong with Aided and Abetted!!THE CHART HAS UPDATE IDEAS WRITTEN THE ORGINAL LAYOUT FOR THE DAY STILL STANDS JUST LOOKING AT A 5 MIN TF FROM HERE ON OUT TO GET A BETTER VIEW OF WHERE PRICE WANTS TO GO.....
I would drop down to the 1 min 30sec and 15sec chart to look for ideal entries. Dont let powell chop you to pieces
KEY: Jerome Powell and Janet Yellen start speaking at 10 am US EST. \Powell and Yellen is a COMPLETE SUICIDE MISSION TO BE TRADING! POWELL IS IN FRONT OF CONGRESS TODY! SO, WHAT DOES THAT MEAN!? The markets will be crazy erratic price action as these two power speakers speak in front of congressional members.
75: Post-Liquidation Strategy for Nasdaq Mini FuturesAfter liquidating longs at the low, we aim to hold the level of 20,712 in the Nasdaq Mini Futures market.
Recent market movements have shown increased volatility, making it crucial to identify key support and resistance levels. Staying informed about macroeconomic events and earnings reports is essential as these factors can significantly impact market direction.
Bullish Scenario:
If we maintain this level, we will wait for a gain at 20,713 and then look for new highs around 20,752.
Bearish Scenario:
When losing this level (20,712), we will shift our focus to 20,686 and wait for new scenarios to develop.
Staying vigilant and adaptable in this volatile market environment is key to navigating potential trading opportunities and risks.
7/9 The Layout for the Morning Session.... Powell at 10am estGREATTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT MORNING YALLLLLLLLLLLLLLLLLLLLLLLLLLLLLLL!!!!!
😏 😏 😏
07/09/2024
**News** ON THE BLOCK TODAY!!!!
***Jerome Powell Speaks*** WATCH OUT HIS WORDS WILL WHIP SAW THIS LIKE NO OTHER
10 AM ET
***Michael Barr Speaks***
9:15 AM ET
***Midnight*** **CONSENTRATED CONSOLIDATION **
*#ES 5638*
*#NQ 20734.25*
💰 **BUYSIDE**💰
***#ES 5640***.--->Above this level we look for --->....
🟢 5653.25
🟢 5676.85
🟢 5694.75
🟢 5711.25
🟢 5727.50
🟢 5738.25
***#NQ 20748.25***...---> Above this level we look for-->
🟢 20754.50
🟢 20788.50
🟢 20813.00
🟢 20843.75
🟢 20878.00
🟢 20902.25
🟢 20933.25
💰 **SELLSIDE**💰
***#ES 5632.75***--- Below this level and we look for
🔴 5616.75
🔴 5604
🔴 5580
🔴 5564.50
🔴 5550.25
***#NQ 20703***---> Below this level and we look for
🔴 20685
🔴 20656
🔴 20639
🔴 20619
🔴 20594
Today's analysis.That's the analysis for today. I want to let you know that we have high impact news that may affect the market. Watch out
NQ Power Range Report with FIB Ext - 7/9/2024 SessionCME_MINI:NQU2024
- PR High: 20699.00
- PR Low: 20672.50
- NZ Spread: 59.5
Key economic calendar event
10:00 | Fed Chair Powell Testifies
Maintaining ATH push following low vol session to start week
Evening Stats (As of 10:15 PM 7/8)
- Weekend Gap: N/A
- Gap 10/30/23 +0.47% (open < 14272)
- Session Open ATR: 245.00
- Volume: 31K
- Open Int: 260K
- Trend Grade: Bull
- From BA ATH: -0.1% (Rounded)
Key Levels (Rounded - Think of these as ranges)
- Long: 20954
- Mid: 19814
- Short: 18675
Keep in mind this is not speculation or a prediction. Only a report of the Power Range with Fib extensions for target hunting. Do your DD! You determine your risk tolerance. You are fully capable of making your own decisions.
BA: Back Adjusted
BuZ/BeZ: Bull Zone / Bear Zone
NZ: Neutral Zone
NDX rally toward end of the year?I think we should expect a market rally to ~16500-17000 if the ~14600 level holds
NQ - idea'ssaw some people posting about NQ so thought I would try my hand at an idea with finding the ATH's and area's of interest.
UpdatedWait and see what the market does. We are still bullish except that we have formed a 1h gap which means that we will no longer take sellside more than likely. We will see at 09:30 what will happen
NQ Power Range Report with FIB Ext - 7/8/2024 SessionCME_MINI:NQU2024
- PR High: 20618.00
- PR Low: 20581.25
- NZ Spread: 82.25
No key economic calendar event
Hanging below Friday's high
- Daily print showing strength in ATHs
Evening Stats (As of 10:45 PM 7/7)
- Weekend Gap: N/A
- Gap 10/30/23 +0.47% (open < 14272)
- Session Open ATR: 252.98
- Volume: 16K
- Open Int: 265K
- Trend Grade: Bull
- From BA ATH: -0.2% (Rounded)
Key Levels (Rounded - Think of these as ranges)
- Long: 20954
- Mid: 19814
- Short: 18675
Keep in mind this is not speculation or a prediction. Only a report of the Power Range with Fib extensions for target hunting. Do your DD! You determine your risk tolerance. You are fully capable of making your own decisions.
BA: Back Adjusted
BuZ/BeZ: Bull Zone / Bear Zone
NZ: Neutral Zone
THE ONLY TRADES I'M TAKING - KEY LEVELSI went ahead and marked out a few key levels that I am interested in trading in the next 24 hours.
WE CAN ALSO FLIP THE RESISTANCE INTO SUPPORT. If that happens a would be interested in a long on the retest,
Let me know your thoughts below.
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This is not financial advice. This is for educational purposes only.
Will we be seeing lower prices for MNQ or Find Support?Watching this area here -- I would like to see price go lower due tot he fact that we already took out the highs on MNQ while ES seems to have a failed high. But We do have an area of support here being this Breaker Block area. Our SL is already past BE just in case. We would like to see price fall faster lower if we are to remain bearish to begin the start of the week.
