Closing at 2797.05, the NASDAQ today stands just .24 percent below its most recent 2803.91 high, reached on October 2007. Remarkably it managed to hurdle, in only 8 months, from 75 percent to 99.76 of its 2007 high.
Whats more, the other two indices failed to keep up with the NASDAQ since last July. Back then, the recovery rate of the DJIA stood at 70 percent of the October 2007 high; and the S&P500 had reached the 65 percent mark. But since then, DJIA deficit gap rose to 86 percent. So the NASDAQ improvement rate, or the DJIA lag, has widened to 13 percentage points,.
Similarly, todays S&P500 ratio is 85 percent of its 2007 top; thats almost 15 percentage points behind the NASDAQ, while that difference was no more than 10 percentage points before the NASDAQs resurgence moved into high gear.
Yet these disparities represent opportunities for buying into the DJIA and the S&P500. For unless the American business structure has undergone significant changes, these three indices should maintain their historical value differences.
At the top of 2007, the market valued the S&P500 at near 56 percent of the NASDAQ price; today that ratio has slipped 9 percentage points, standing at just 47 percent of the NASDAQ price.
Similarly, the DJIA priced was 5.05 times larger than the NASDAQ; today the DJIA valued is substantially smaller, with the ratio down to 4.37.
We have not overlooked the continuation of the DJIA streak which now stands at seven successive gains. But the prospects of price ratios changing as the S&P500 and the DJIA catch up with the NASDAQ recovery rate, look to be a better opportunity.
DJIA .59 percent
NASDAQ .47 percent
S&P500 .42 percent