Breakout

Surging Nasdaq an Indicator of Strengthening ‘Technology Revolution’ Says Hays

Breakout

After blasting above 4,000 at the start of trading Monday, the Nasdaq (^IXIC)  had finally broken through a millennial milestone that had been looming over it for months.  And yet, within minutes, the festivities were already being reigned in, thanks in part to the sudden and sharp reversal of the social media stocks like Facebook (FB), Twitter (TWTR), and Yelp (YELP), which have sharply trailed the Nasdaq for two weeks. 

The outsized decline by the market’s momentum leader yesterday caused some to wonder if the much-anticipated meltdown was actually starting to happen.  For veteran market watcher Don Hays, any dip or loss of momentum is troubling, but not a deal-breaker for a long-term bull.

“In the short-term, the market is a little tired, it needs a little rest,” the chairman and founder of Hays Advisory Group.  “You can see it in some of these leading momentum stocks,” such as social media, he adds, before pointing out that this has been the case for the past three or four months.

But don’t be fooled. The Nasdaq’s “4-k moment” is no small event. In fact, by some measures, the tech-heavy benchmark is really “a better indicator,” Hays says, especially given the ongoing “technology revolution.”

In fact, if you wipe out your short-term fears and just focus on the big picture, this affable Tennessean says “the basic infrastructure of the bull market is still very much alive,” and will remain so until the Federal Reserve decides it is time to put an end to the party.

“So (the Fed) is a long way from tightening the screws on this bull market,” Hays says, noting that monetary policy and liquidity are at some their best levels in the past 50 years.

“The little word ‘bubble’ is being bandied around a lot. It’s very popular for some reason” Hays observes. “That is another good reason to believe that this is not a bubble. It’s more like part of a bull market, and the bubble is still out there in future-land somewhere.”

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