2020-01-16

If This Be a Melt-Up

The ratio of SPDR Technology (XLK) to the SPDR S&P 500 Index (SPY) is about where it was in 1998. That spike on the chart took place over the course of 15 months, when the Nasdaq more than tripled from its 1998 correction low. The first part of this rally isn't on the chart because XLK didn't exist yet. SPY is currently about $330 and XLK is $95, call it a ratio of 0.30. The ratio peaked at 0.49, call it 0.50. Assuming the S&P 500 Index would gain around 20 percent in this scenario (SPX 4,000 anyone?), SPY would rally towards $400 per share. XLK would rally to $200, a 100 percent increase. AAPL could trade at $800, Amazon $5000, Google $3000, Facebook $1000, Tesla $1000, maybe AMD $500 assuming one or more stocks end up rallying 10 fold like the eventually dotbombs of the late 1990s. (Amazon was one of those dotbombs by the way).

This is not a forecast, but it is what a repeat of the 1999 market melt-up would look like.

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