Nasdaq Breadth Collapse Hints at Tech Bubble Risks
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Recent collapse in Nasdaq market breadth suggests risk appetite is waning and index is being propped up by a handful of mega cap tech stocks, similar to prior market peaks in 2007 and 2021
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Valuations remain extremely high even after adjusting metrics like P/E and P/FCF to account for factors like high stock-based compensation
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Indiscriminate buying driven by trends and lack of concern for risk has pushed valuations higher, but such conditions can quickly reverse
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All it may take is a small rise in risk premiums for a significant correction in tech stocks
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Negative breadth spikes typically foreshadow market peaks as a few stocks prop up indexes just before broader reversal