Nasdaq Is Leading Equity Indexes Higher

By Gregory Clay

Thursday, September 22, 2016 10:49 AM EST

Yesterday was an historical event as the NASDAQ reached an all-time high. As evidenced in the hourly chart below, approx. a week ago the Nasdaq index diverged higher away from other major equity indexes. Yesterday the Fed gave investors what they wanted to hear after their FOMC meeting and stocks immediate surged to upside. It is reasonable to expect the Dow Jones Industrial Average and S&P 500 indexes to rise and sync back up with the Nasdaq. However, long-term don’t expect stocks to take off because investors are already discounting the market based on the odds of a December rate hike. It appears the Fed may have run out of ammunition to continue driving up equity prices, whereas the prospect of the Fed raising rates accelerates downside volatility. The November election will be out of the way and there will certainly be pressure on the Fed to normalize rates.

The year-to-date chart below supports our contention the Dow and S&P 500 can be expect to rise. Note that the Nasdaq has basically led the market up and down all year.

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