This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

3 Reasons Why the Nasdaq Has Plummeted Since March: Stocktwits.com

Stocks in this article: QQQFEYEYELPNFLXP

NEW YORK (TheStreet) -- The Nasdaq 100 (QQQ) has been under pressure since early March. In-fact, it's down 5% since then. On StockTwits, we continue to see interesting explanations for the sell-off. But we're also seeing signs that the market may be ready to bounce and go higher right now.

Several investors have attributed the recent sell-off to the overvaluation of momentum tech stocks. Mainly companies like FireEye (FEYE), Yelp (YELP), Netflix (NFLX) and Pandora (P). These stocks are all down more than 20% since last month. Other investors have cited an exhausted uptrend, which has manifested in technical breakdowns across the board. In this post, we are sharing 3 possible explanations for the sell-off. But we also want to hear from you -- so please share your thoughts below:

1) Doug Short, who writes daily and weekly columns about the valuation of the stock market, believes that the market could be anywhere from 51% to 84% overvalued. Short likes to compare several ratios like the Crestmont P/E Ratio, Cyclical P/E 10 Ratio, and Q Ratio to their arithmetic means. He uses these valuation ratios to roughly gauge the value of the market compared to its historical levels. Here's the original post that caught our eye -- it was shared on StockTwits:

Here's Doug Short's latest market valuation analysis - overvalued between 49% and 82%! http://stks.co/c0PaG $SPY $DIA $QQQ - Elliott Wave Analytics (@elliottwave) Apr. 7 at 04:22 AM

2) Another theory proposed for the recent sell-off is the formation of a new equity rotation. This time, both defensive and value oriented stocks are at the forefront. Momentum stocks were clear leaders in 2013, but so far that is not the case in 2014. This simple and succinct comment caught our eye earlier this morning:

Significant rotation continues from Growth to Value Stocks and from Cyclicals to Defensive Sectors. $SPX $DIA $QQQ $IWM - Ben Silverberg (@silverjet2) Apr. 8 at 07:51 AM

3) The third and final explanation for the Nasdaq's recent sell-off is an interesting one. It has to do with taxes. If you remember the 2000 tech bubble, a similar yet more extreme sell-off also happened in April of that year:

In 2000 the Nasdaq fell 25% in 2nd week of April so ppl could pay taxes following big gains in 1999. Rebounded 19% last 2 weeks April $QQQ - 1971 Capital (@1971capital) Apr. 8 at 08:30 AM



Follow @scheplick

Follow Us on StockTwits

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,363.92 +168.50 0.98%
S&P 500 0.00 -2.75 -0.14%
NASDAQ 4,625.41 +59.2720 1.30%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs