There is good news and bad news. Bad news first. The Nasdaq is building up for a crash. The good news: we might get another couple of spectacular years out of the Nasdaq before it does.
It is a simple call. Whenever assets or markets go parabolic, there will crash at the end of that trend. Here are a few examples.
The Dotcom:
Bitcoin:
Bitcoin, time and again.
Commodities boom and crash with regularity and have done so since time immemorial. Cocoa is doing it right now. You can probably bet that this price will be under $400 in a year or so:
This is the Nasdaq:
The good news is there is 25,000 on deck but the bad news is the market is shaping up for a last leg of a bubble that must burst horribly. You can see the mini bust caused by QT, but the next one will not be back stopped because it won’t be part of a wider systemic situation.
So this chart says strap in for the ride and pay special attention to anticipating the end of this run. Judging the top of a massive final bull spike is an extremely tricky game, but we are now in that part of the cycle. To me it looks like there is a good way to go in price, but that may not turn out to be a long period in time. The faster the market gets into the vertical spike, the closer the end will be. The slower, the longer the market will rise before its “correction.”
Exponential moves can be sustainable but only if the time base is long enough. If a market is driven by forces that create a vicious circle of rises, these price increases simply outpace sustainability and you can see that appreciation in the Nasdaq, as it must with compounding, accelerating.
The so called “hockey stick” is the architype of the boom, bubble and bust cycle and it is one of the fundaments of asset price behavior.
We are now in the bubble section and there is a lot of money to be made long in such a period. The trick is getting to keep the profits. The trick to that is to understand that there is no escaping the bitter end of the wonderous final leg of this cycle and that making profits is easy but keeping them is tough.
For now we can rest easy but soon enough the months will pass and the market will rise and the moment the dam breaks will get ever nearer. Make sure you keep track.
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