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Our NASDAQ ROC Chart shows definite buy and sell signals by providing an instantaneous view of what the Annual Rate of Return the NASDAQ has provided since 1991. Because these highly accurate signals are based on the rate of return, not on price, it makes it easy to see whether the NASDAQ is in an uptrend or not and when to buy or sell.
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The Ultimate Technical Analysis Handbook. from Elliotwave International
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(click on chart for larger image) Get the ROC charts hot off the Presses! Subscribe to our FREE monthly E-zine "E-Trends" and we will notify you when the charts are updated.
The following table shows the recent monthly returns on the NASDAQ.
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Updated 1/15/2010 The NASDAQ Rate of Change (ROC) chart is very helpful in getting the "big picture" view quickly. The old saying "a picture is worth a thousand words" is very applicable to this chart. Once you understand what it is showing you this chart will easily point out the direction of the market and make it easy for you to decide whether you want to be in or out of the market. The NASDAQ Rate of Change (ROC) chart shows the annual rate of return along the left axis and the years since 1990 along the bottom. Remember this chart shows the rate of return not the current price so it is much easier to see performance. Want to know if we are up or down from last year? Simple, if we are below the zero line... the NASDAQ is down, if we are above the zero line... the NASDAQ is up. The key is to exit positions while we are in positive territory (with a gain above the line) rather than waiting until we have a loss. We simply exit, sit on the sidelines safely with our money intact and reenter when we get a buy signal. The red line is the 12 month moving average. As with most moving averages a buy signal is generated as the index crosses above the moving average and a sell signal is generated as the index crosses below the moving average. (See Current Analysis Below) Another helpful way to use this chart is to look at the slope of the red moving average line. If the slope is down the market is trending down if the slope is up the market is moving up. And obviously if the line is basically flat the market is not trending at all. Just because this chart is not moving higher does not mean we should sell. In the period from June 2004 - June 2007 the red moving average line was basically flat, although it had a bit of wiggle, but it was still flat at around 10% rate of return so holding during that period would have produced returns very close to the long term average. If you are looking for big gains, the best buy signals come from a movement from below the 0% line. This allows you to capture the greatest up move. Note: While viewing this chart we must remember that it represents the rate of return we would have earned if we had been holding the entire NASDAQ for the previous 12 months. This can be achieved through the use of an index fund or ETF. Current Analysis:The NASDAQ ROC index was up over 5% the last month. Bringing the annual rate of return over 55%. This is in "nosebleed" territory similar to those leading up to the "Tech Wreck" of 2000. Does that mean the end is near? Possibly, possibly not. Never underestimate the levels of craziness in the market. Back in 2000 the annual rate of return was over 100%. This time the mania is not so much speculative as a simple rebound from the crash with a goose from the bailout. Will it continue? Who knows there has never been a stimulus of this magnitude before. A typical rebound correction will retrace between 30% and 60% of the loss before continuing downward. The drop from 2859 in 2007 to 1268 on March 9th 2009 is 1591 points. If we got a 60% rebound that would take us to 2222 (since we are currently at 2316) we are at a critical juncture. We are nearing a point of proving that we are not in a "bear market rally". But remember we are not in a typical situation. With the unprecedented stimulus package we are in uncharted territory. Perhaps all that funny money will take us well above the 60% rebound. See the NYSE ROC for further details. Tim McMahon, Editor
Disclaimer: At Financial Trend Forecaster we are not registered investment advisors and do not provide any individualized advice. Past performance is not necessarily indicative of future performance and future accuracy and profitable results cannot be guaranteed. Note: We are a compensated affiliate of Elliottwave International, meaning we may receive a commission if you use our links to their site.
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