NASDAQ INDEXES REACH 12-YEAR HIGH AND ARE LEADING REST OF MARKET HIGHER -- APPLE IS A HUGE PART OF THE NASDAQ BREAKOUT, BUT NOT ALL OF IT -- OTHER STRONG NASDAQ STOCKS INCLUDE INTEL, QUALCOMM, AND COMCAST
NASDAQ INDEXES HIT 12 YEAR HIGHS... The plunge in the Nasdaq market during 2000 began the "lost decade" for stocks which have essentially trended sideways since then. The good news is the same Nasdaq market may be leading stocks into a better decade. Chart 1 shows the Nasdaq Composite Index rising above its 2007 high to reach the highest level in twelve years. The gray matter on Chart 1 is a ratio of the Nasdaq divided by the S&P 500, which has also reached a 12-year high. It's normally a good sign for the rest of the market when the Nasdaq is leading it higher, which it has been doing since 2009. Chart 2 shows the PowerShares QQQ Trust also trading at a 12-year high. The gray matter in Chart 2 is a ratio of the QQQ divided by the Nasdaq Composite. The rising ratio shows that the QQQ is rising faster than the Nasdaq Composite which is another positive sign. The QQQ represents the 100 largest non-financial stocks in the Nasdaq, most of which are in technology. Large technology stocks account for 68% of the QQQ which is by far the biggest sector weighting. Technology leadership is usually good for the rest of the market. The technology sector has gained 18% since he start of the year versus a 12% gain for the S&P 500, and is second only to the financial sector's gain of 22%. The QQQ has gained 24% year to date versus 15% for the COMPQ. A lot of the gains in those two technology indexes is coming from one stock -- Apple.
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Chart 1
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Chart 2
APPLE HAS GAINED 600% SINCE 2009... One of the questions about the Nasdaq breakout is how much of it is being caused by the parabolic climb in the stock of Apple. Chart 3 compares the price of Apple (AAPL) to the Nasdaq 100 (gray matter) over the last decade. Since the start of 2009, Apple has risen more than 600% versus a 130% gain for the QQQ. Apple has gained 88% during 2012 alone,, versus 24% for the QQQ. The reasons that's so important is because Apple is the biggest holding in the QQQ at 18%. There's no doubt that Apple's incredible run is having a huge impact on the Nasdaq market. But some other heavily-weighted QQQ stocks are rising as well.
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Chart 3
OTHER NASDAQ BREAKOUTS... The charts below show three of the largest stocks in the QQQ that are either in uptrends, or starting a new uptrend. Chart 4 shows Intel moving up to a new eight-year high and in the early stages of a new uptrend. Chart 5 shows Qualcomm trading at a 12-year high. Chart 6 shows Comcast having just broken out to a new 12-year high as well. The point of showing these charts is to demonstrate that the recent rise in the Nasdaq market isn't just based on Apple. Apple is playing a huge role, but it's not the whole Nasdaq story.
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Chart 4
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Chart 5
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Chart 6
MICROSOFT TURNS UP... The second biggest stock in the QQQ is Microsoft, with a weight of 9%. MSFT is also part of the Nasdaq rally. Chart 7 shows Microsoft breaking out of a "triangular" pattern at the start of the year before rallying to the highest level in four years. It's next chart barrier is the 2007 high near 34. The monthly bars in Chart 8 show that Microsoft has also broken a resistance line drawn over its 2000/2007 highs. This big technology stocks has basically traded sideways over the last twelve years (as has the rest of the market, including the Nasdaq). That's why this year's impressive rally in MSFT also lends more weight to the recent Nasdaq breakout.
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Chart 7
