With the "troika" of the US mid-term elections, FOMC meeting decision on QE-2, and the US Employment Situation Report having been digested by the markets, we thought it instructive to step back and take a longer-term viewpoint of the NASDAQ Composite. Perhaps by looking at the Composite, we can infer whether or not QE-2 will be successful in terms of raising asset prices in the coming year or years. Certainly the Composite has been a relative laggard since the bubble days of 1998-to-2000, that is until the past year. Thus, it piques our long-term interest, and perhaps more importantly...it will clear and discernible impact our trading strategy.
Turning to the monthly chart, we find the multi-year bullish triangle of which trendline resistance is clearly being given - which would argue for new highs years down the road. Certainly recent dour economic prognostications related to money printing et al should be the type of environment in which this should occur. But the fact of the matter is that support levels are holding, while resistance levels are being violated - the hallmark of a bull market. Moreover, the probability for prices extending their gains is rather good the 35-month moving average support level has time and time again over the course of 4-months held up admirably to assault. We are rather impressed by this; and our readers should be too.
Therefore, as long as the 35-month moving average provides support - then one must consider using sharp corrections upon which to accumulate technology shares. Once it does fail, then we'll be inclined to be aggressively short...but not until then. The final fact of the matter is that QE-2 may have some very real long-term unintended consequences - meaning very sharply higher asset prices or "bubbles" once again. And who doesn't like sharply higher asset prices? So...here's three cheers to the "good ole' days" of the 1998-to-2000 NASDAQ rally!