Talking Numbers

Why the NASDAQ may be hitting the law of large numbers

NASDAQ may be hitting law of large numbers

The NASDAQ is trading at its highest level in over a decade and is up more than 1,000 points in the past year. If it can eke out another 1,000 points, or rally 25% from here, it will have retraced all its losses from the dot-com bubble and trade above 5,000.

So how likely is that?

After all, the NASDAQ has soared nearly 20% since June, and many of its largest components like Microsoft and Apple sport P/E ratios that are more on par with names like Coke and McDonald's than with high flying tech stocks.

Still, some market participants aren't holding their breath for NASDAQ 5,000 anytime soon.

(Check out: U.S. stocks end lower)

"I think it will get there," said Gina Sanchez of Chantico Global. "I just don't think it'll happen next year, and that has more to do with the extraordinary runs some of these names have had than with valuations."

Google and Microsoft, two of the largest stocks in the NASDAQ 100, have rallied a respective 50% and 42% this year and now sport a combined market cap north of $600 billion. Apple, which is the largest component in the NASDAQ, is only up 6% this year. But despite that tepid rally, the tech giant is still worth a staggering $511 billion, and is now the largest company in the world.

(Read: Deal time for Apple and China Mobile?)

Of course, there are other names in the NASDAQ, but the best performing ones have been on such a tear, one has to wonder if the bubble term isn't being used enough. Facebook and Amazon have rallied a respective 83% and 53% this year and together are now worth almost $300 billion – this despite a scant record of turning profits.

So what's going to take the NASDAQ higher? Biotech and the financials have lagged the broader tech index, and some feel a catch-up rally could be in order. But those sectors are relatively small and would need to see massive moves to get the index to 5,000.

So do the charts offer any hope? Watch the video above.

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