The 2022 Tech Bubble Fractals and Sentiment Analysis

2021년 8월 3일

Introduction
I was inspired by CryptoKaleo's post (original post below) on the "Next Tech Bubble", where he predicted a tech bubble to take place in the coming years based on the fractals of the 1998-2002 Dot com bubble market price action.

Disclaimer: This is not investment advice. This is for educational and entertainment purposes only. I am not responsible for the profits or loss generated from your investments. Trade and invest at your own risk.

Analysis
I myself have been also thinking about the probability of another 2000-esque bull rally for the Nasdaq index for a while now.
You can check out my analysis on the comparison between the market in 2020 and the Dot com bubble, which I posted last year:

My goal for this post was to not only compare the price action of the two periods through fractals, but also to research the headlines of financial news from the past, in order to more accurately research the sentiment that was reflected on the media. The quotes in red are direct quotes from 1998-2002, and the quotes in black are recent news that reflect the current market sentiment.

We can see a clear shift in sentiment; optimism > euphoria > fear > surrender.
The most notable parts of the cycle is the euphoria at the absolute top of the market, and sense of despair at the bottom of the market.


This figure will further help you understand the structure of a market bubble, and the market sentiment according to the price action of the market.
What's extremely interesting is that the Dot com bubble demonstrated a textbook pattern of a market bubble structure.

Conclusion
There may be multiple news that could potentially trigger the next market bubble. If one were to occur, it's highly likely that we see it happen in the tech/bio sector this time, where insane multiples are given based not on the current financials of the company, but the prospect of it. While there is also a probable case where we don't see a bubble at all, if it we were to see the market make parabolic moves up to overbought levels, referring to fractals of the past, and comparing the market sentiment of the past, could provide a guideline for us to refer to.

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I would also appreciate it if you could leave a comment below with some original insight.