Cyclical bear market coming?More than a third of Nasdaq stocks slashed in half | Anue – US Stocks

“Bloomberg” reported on Friday (14th) that Ned Davis Research released a new report stating that more than one-third of the Nasdaq Composite Index (IXIC) components have halved in price, or suggest that a cyclical bear market is on the way. Whether there will be another rescue in earnings season is worth watching.

Technology stocks have tumbled recently, and the Nasdaq is still only down about 8% from its November high, and the index has more than doubled in less than two years, just shy of market expectations.

Beneath the surface, however, things look much worse for tech stocks.

More than 36% of the index’s constituents are down at least 50% from their 52-week highs, according to Ned Davis Research. Typically when the Nasdaq is down less than 10% from its peak, only 12.5% ​​of stocks on average have fallen that much.

Ned Davis said it is unclear whether the market is breaking with convention, and is it hinting that there will be more painful patterns in the future?But in the past, when the Nasdaq dropped so many stocks from its peak, it usually meant a “cyclical bear market.”, which usually refers to a short-term decline of at least 20% from an all-time high for several months.

That scenario reflects the extent to which tech giants have had an impact on the Nasdaq’s weighting, and these big tech stocks haven’t been hit as hard this year as some smaller, fast-growing tech companies.

Ed Clissold, chief U.S. strategist at Ned Davis, said the market breadth of the Nasdaq’s rout is quite sad, and when people are in that situation, it’s hard to tell if it’s a normal rolling correction or a bull market peak, but it continues. The longer it is, the harder it is to ignore.

The cyclical bear market wind indicator occurred at the height of the dotcom bubble in 1998 and 1999 (Image: AFP)

Since 1972, the Nasdaq has seen only 39 days when the index has fallen less than 10% and more than 35% of its constituents have been cut in half, according to Ned Davis. All of this happened at the height of the dotcom bubble in 1998 and 1999 until December 2021.

“We’re going to have to see if there’s another bailout in earnings season,” Clissold said. Technical indicators like market breadth have improved over the past few quarters as earnings outlooks have improved. Still, earnings revisions over the past few weeks have not been as good as last year’s. Earnings were so strong pre-season, so we don’t think there will be as many earnings beats.”

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