Three Horsemen Left, Nine “Hindenburg Omens”, Nasdaq Collapse?
The Nasdaq has the only 4 companies valued in excess of $800 Billion each: Apple (AAPL $1.077 Trillion), Amazon (AMZN $970 Billion), Microsoft (MSFT $852 Billion), and Alphabet or Google (GOOGL $881 Billion). These four companies represent nearly 25% of the value of the entire 3900 issues listed on the Nasdaq. The influence of these four is unprecedented and some of the relevant stats are computed in our piece called “Tipping Point (Part 2): The Four Horsemen of the Nasdaq Collapse” (https://markonomics101.com/2018/08/23/tipping-point-part-2-the-four-horsemen-of-the-nasdaq-collapse/).
These companies have pulled the Nasdaq sled up hill, virtually by themselves. Apple, by itself, has seen its share price rise from $160 to $230 over the last 4 months. That increased AAPL’S market capitalization by more than $300 Billion, an increase the size of JP Morgan Chase or Wells Fargo.
Then There Were Three
The Four Horsemen, as well as the Nasdaq, display the hallmarks of a late stage bubble. Their chart patterns have either been parabolic, like AAPL, or an Ascending Wedge. AAPL and AMZN are still BULLISH but testing key support. MSFT is BULLISH and still above support. GOOGL apparently, “has left the building”, now sporting a BEARISH look. Perhaps most importantly, the Nasdaq 100 looks to be testing support of the lower bounds of its Ascending Wedge.
The Nasdaq and the Four Horsemen could still rally a bit more so it’s too early to do anything except let the markets sort themselves out. However, the charts would appear to be painting an ominous picture.
As a side note, Robert McHugh who publishes (https://www.technicalindicatorindex.com/) is most likely the foremost expert on the “Hindenburg Omen”, which is a measure of how a market is fractured, i.e. not in sync. For more information and details on this technical indicator, please see our article on the “Hindenburg Omen All Over The Financial Press” (https://markonomics101.com/2018/03/15/hindenburg-omen-all-over-the-financial-press/). In a recent email, McHugh indicated that he had calculated 9 separate Hindenburg Omens including NYSE and Nasdaq over a 7 day period. And, once again, the Hindenburg Omen IS AGAIN ALL OVER THE FINANCIAL PRESS (https://www.bloombergquint.com/markets/2018/09/13/the-hindenburg-omen-is-stalking-near-record-u-s-stock-market#gs.Ho7jUAc.)
While they are far from perfect in forecasting markets, they precede severe declines and market crashes with a much greater frequency than by pure randomness.
The market remains in an Ultra-High Risk mode. It is prone to violent and sharp sudden reversals and will prove a nightmare to navigate.