Why Sell the NASDAQ 100?
The long-term picture
The long-term chart clearly shows that the NASDAQ 100 Index is in a down-trend which started in March 2001. In September/October 2001 and 2002, we witnessed so-called "Bear-Market Rallies" which soon succumbed to renewed selling pressure.
Since October of last year, the long-term down-trend has lost some stamina and the resistance level around 1,100 has to be watched carefully. Should it break decisively, we could easily experience a shortcovering rally which could lead the Index towards 1,300 points.
A break in the support level at 900 to 925 points would confirm the down-trend.
The medium-term picture
While the Nasdaq 100 Index remains stuck in the horizontal channel between 900 and 1,100 points, it is not clear in which direction the next big move will unfold.
We believe that it will be on the down-side but would advise those who wish to short the market to place stop loss orders above 1,100 points.
The short-term picture
Short-term, it is evident that those who are short have to watch the December high of 1,155 points and should the Index close above this level, all short positions should be closed.
Once the world realizes however that Iraq is not a country to be so easily controlled by foreign troops and administrators, selling pressure will resume.
A short -covering rally is always possible, but a fundamental change of direction is unnlikely.
Are US-markets fundamentally cheap?
Historically, a FAIR-valuation of US-markets has indicted a dividend yield of 5 to 6%. Nonetheless, current dividend yields are still below 2%. The answer to the above question is therefore simple: NO!
The following recommendations were valid at the time of writing, viz. at
and may no longer be relevant at the time of reading.
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Peter Zihlmann
April 16, 2003
Disclosure: The author has not been paid to write this article nor has he
received any other inducement to do so. The author is a shareholder in the
company and will benefit from any increase in the company's share price.
Disclaimer: The author's objective in writing this article is to invoke an
interest on the part of potential investors in this stock to the point where
they are encouraged to conduct their own further diligent research. Neither
the information nor the opinions expressed should be construed as a
solicitation to buy or sell this stock. Investors are recommended to obtain
the advice of a qualified investment advisor before entering into any transactions in the stock.
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