Chart 1: Nasdaq's monthly chart as at Mar 9, 2015 (Sourced: Yahoo Finance)
Nasdaq has benefited more from the rally in Wall Street than S&P or DJIA. If we plot the ratio of Nasdaq to SPX or Nasdaq to DJIA, we can see that these 2 ratios have been rising. This indicates that Nasdaq is rising at a faster pace than either SPX or DJIA. The other thing that you may notice is that the ratios are now pressing against the upper line of the upward channel of the 2 ratios. A breakout of that channel would lead to an outperformance of Nasdaq vis-a-vis SPX or DJIA. This could happen with Nasdaq either rising faster or dropping slower than SPX & DJIA. However, with Nasdaq approaching the all-time high, I believe that it is more likely that we will see a correction in Nasdaq which would lead to a pullback of the ratios within the channel.
Chart 2: Nasdaq, Nasdaq/SPX & Nasdaq/DJIA's weekly chart as at Mar 9, 2015 (Source: Stockcharts.com)
During the dotcom bubble v.1 in 2000, Nasdaq was trading at PER of 25X. In the current rally - which some referred to as the dotcom bubble v.2 - Nasdaq 100 has a PER of 23X. This is higher than either SPX's PER of 20X or DJIA's PER of 16X. See the table below.
Table: PERs & DYs of major US Indices as at Apr 2, 2015 (Source: WSJBlog )
The outperformance in Nasdaq inspiered a rally in our technology sector since 2013. The rally could be justified by higher earnings from semiconductor producers as well as selected elctronics parts & components manufacturers. Lurch behind them are countless small ICT players whose earnings had either rebounded or grew in line with the economics growth of the past few years. Lately, they have all benefited from the weaker Ringgit via-a-via the US Dollar.
The big question facing investors is not whether to buy or not to buy, but what to buy?
Chart 3: FBMACE's monthly chart as at Mar 9, 2015 (Sourced: ShareInvestor.com)
Chart 4: Technology's monthly chart as at Mar 9, 2015 (Sourced: ShareInvestor.com)
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