Analysis of the price of the Nasdaq 100 index

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However, one of the most traded indices in the world is the Nasdaq, which has certain specificities such as high volatility. Of course, in order to start speculating on this asset, it is nevertheless necessary to know how it is calculated and what governs its evolution, including the main trend indicators.  

Latest news

Wall Street up despite uncertain election results

05/11/2020 - 13h13

While the outcome of the U.S. Presidential election is still uncertain, the Wall Street stock market mainly traded in the green during Wednesday's session and is expected to show strong volatility.

Elements that can influence the price of this asset:

Analysis N°1

Firstly, it is recommended to closely follow the composition of this index and the largest companies included in it. It should be remembered that the Nasdaq 100 is an index that is weighted according to the stock market capitals. We would also therefore follow the quoted companies that have the highest stock market capitals that could influence this index rate.

Analysis N°2

Another important factor to follow if you wish to invest in the Nasdaq index and to complete comprehensive and pertinent analyses concerns decisions taken by the Fred, or American Federal Reserve, notably when related to the American monetary policy as these decisions can have a far reaching direct influence on the stock markets, including that of Nasdaq. We do actually know that when the monetary policy is accommodating this tends to support the shares markets and in the case of a less supportive policy then this influence can be negative.

Analysis N°3

You should also closely follow certain significant economic data such as bonds, the unemployment rates, inflation, the interest rates and the GDP which provide indicators on possible forthcoming decisions of the Fed.

Analysis N°4

Finally, it is also important to follow the trade wars that could impact certain large companies that are part of the Nasdaq stock market index.

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Presentation of Nasdaq and its characteristics:

Although published and quoted in the United States, Nasdaq is not a national stock exchange index. Its initials represent ‘National Association of Securities Dealers Automated Quotations’ and it represents the new technologies sector on an international level.

The Nasdaq was created by the NASD, the National Association of Securities Dealers (currently known as the FINRA), in 1971 to respond to the major advances in the electronics sector that demanded a dedicated market separate from the global economical markets. Nowadays Nasdaq is the major digital electronic stock market in the world.

It is actually on Wall Street that Nasdaq is quoted. This index is in fact the second most important on this major stock exchange with impressively high trading volumes.

The volatility seen on the Nasdaq is among the highest in the market, making it an asset often used for day-trading or short-term trading.


The NASDAQ market in detail:

In this article you have found useful information about the Nasdaq stock market index, but what about the market of the same name?

The NASDAQ market is a financial centre and stock exchange that began in 1971. Today, this market is the second largest equity market in the United States in terms of trading volumes and is thus second only to the New York Stock Exchange. NASDAQ is also the largest electronic equity market in the world. It has been held by the group of the same name since 2008. Of course, the NASDAQ index is the benchmark stock market index for this market and therefore tends to measure the performance of companies whose shares are listed on it.

Today, the total market capitalization of this market is more than $1 trillion and it lists the shares of more than 3,200 different companies, the vast majority of which suffered significant losses during the collapse of the speculative bubbles. Exchanges are processed continuously and on different servers grouped in a single room. The systems housed there are thus able to process more than 900 transactions per second.

It is also important to note here that companies listed on the NASDAQ market very often come from the IT and Internet sector. However, there are also stocks from other sectors such as banking, distribution, biotechnology, industry and transportation. This index is therefore much more representative today than in the past.
Finally, it should be noted that the NASDAQ market also plays the role of a natural outlet for venture capital funds, which is a financing method whose principle is to accept the risk of losing money in nearly three quarters of cases by compensating with the remaining quarter, which is most often a company capable of rapidly increasing its size.


Companies included in the Nasdaq

Although you can speculate on the actual Nasdaq stock market index rate using CFDs you can also trade in one of the companies quoted on this stock market index. Of course, we will not cover all the 100 companies included in this index here but we will examine the top ten companies of this index. Here therefore are details of the top ten companies on the Nasdaq at present in terms of stock market capital:

Important note! The classification that we have presented here is of the situation as at January 2021. It is clear that this may therefore change with time as the capital of the companies quoted changes regularly according to their share price. Also, even though these companies hold significant positions in the composition of the Nasdaq 100, they could exit this index and be replaced by other companies.


What are the factors that could change the Nasdaq rate?

As is the case for the rates of other major stock market indices around the world such as the CAC 40, the FTSE 100, or the DAX 30, the Nasdaq rate can change, either with a rise or a fall, depending on the interest shown by the market traders in a particular asset. In fact, the Nasdaq 100 rate will rise when the volume of transactions rises, and the rate will fall when the stock market transaction activity decreases. In this article we will explain the factors that can influence the rate of this stock market index that you should therefore monitor closely. 

Of course, we know that the Nasdaq index rate can be influenced by certain stock market events relating to the companies that are quoted on this index such as the creation of new products or services, the nomination of new managers or directors as well as the publication of annual or quarterly financial results. 

The Nasdaq rate can also be influenced by certain specific economic factors in the United States. For example, the monetary policy or the interest rates could have a strong impact on this asset as well as other economic indicators that reflect the performance of the country or indirectly the household spending or investment levels of companies. Generally speaking we know that this stock market index and the market it is linked to is directly influenced by economic figures published by this country such as those related to growth, inflation and employment over one month, six months or a year which are particularly monitored. 

It is clear that the same is true with the political data as we have observed recently with the strong reaction of the markets to the tweets and declarations of Donald Trump. This American President became an indicator of the market feeling which strongly influenced the stock market rates and was therefore followed by a number of investors. We can also confirm that the geopolitical tension can exert a strong influence on the Nasdaq 100 stock market index as was the case recently with the trade war between China and the United States. This tension can in fact, depending on the circumstances, cause a rise or fall in the rate of this asset. 

Of course, an economic or financial crisis will also have a direct influence, often negatively, on the rate of this asset. This was notably the case in 2008 with the infamous sub-prime crisis which led to a drop in the Nasdaq 100 index rate, and the same is true for the Covid-19 pandemic although the technological assets have in fact suffered less from the latter than other assets. 

As with other indices of this type, the economic cycles are part of the factors that can influence this rate. In fact, the cycles of recession, expansion, recovery and over reaching tend to repeat themselves and are often followed and used by investors on the Nasdaq 100. It should be noted here that these cycles depend greatly on the particular activity sector.

Finally, another factor that could exert a strong influence on the Nasdaq 100 index rate is the market feeling. Here the data you should analyse relates more to psychology and it is best if you are experienced in stock market trading and investment to understand how the traders will behave in different situations.

Frequently Asked Questions

What is the difference between the Nasdaq 100 and the Nasdaq Composite?

The Nasdaq 100 stock market index is often confused with another stock market index, the Nasdaq Composite. Although the names of these two indices are similar, they are related to different markets, particularly due to their size. In fact, to the contrary of the Nasdaq 100 which includes the top 100 largest non financial companies, as indicated by its name, the Nasdaq Composite includes all companies quoted on the Nasdaq stock market. It should be remembered here that this stock market is the second largest financial marketplace worldwide just after the NYSE or New York Stock Exchange.

How is it possible to invest directly in the Nasdaq 100 index rate?

Although it is obviously possible to buy shares in the companies that are quoted on the Nasdaq 100 stock market index it is also possible to speculate directly on the rate of the Nasdaq 100 index as a stock market asset. To do so you can choose from various different types of trading tools including futures and CFDs, or ‘Contracts for the Difference’. It should be remembered here that the Nasdaq 100 futures are traded on the Chicago Mercantile Exchange, or CME, which is one of the major futures markets in the United States.

Is a technical analysis useful for studying the Nasdaq 100 index rate?

Although a fundamental analysis is clearly necessary if you wish to invest in the Nasdaq 100 index rate, the usefulness of a technical analysis should not be ignored. In fact, both types of analyses are complementary and it is recommended to use them together if you wish to obtain more reliable trading signals for a rise or fall in this asset rate.

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