Bulls look for Nasdaq to finally recover from tech bubble burst

2015 may finally be the year of the Nasdaq.

After nearly 15 years, the Nasdaq finally looks like it could regain its March 10, 2000, high of 5,048.62.

That type of 5 percent gain should not be difficult for the Nasdaq, given that a group of 15 top strategists surveyed by CNBC expect the S&P 500 to rise about 6 percent during 2015 from its current level of 2,090. While the S&P is up 13.1 percent so far in 2014, the Nasdaq has raced along faster—gaining 15 percent.

Traders work on the floor of the New York Stock Exchange, Dec. 29, 2014.
Carlo Allegri | Reuters
Traders work on the floor of the New York Stock Exchange, Dec. 29, 2014.

"I think that's not going to be a problem for the Nasdaq to surpass its prior 2000 high. The quality of the companies are completely different today. They have a lot more earnings power. And the valuations are a lot more reasonable," said Thomas Lee, co-founder and strategist at Fundstrat Global Advisors.

The Nasdaq ended at 4,806, basically unchanged on the day Monday and the highest close since March 2000.

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Paul LaRosa, chief market technician at Maxim Group, said the action in the Nasdaq is important this week and it could be key for the market overall. He is watching to see if the Nasdaq can close above 4,810, its intraday high from Nov. 28, 2014. So far, the other major indexes—the Dow, S&P 500 and Russell 2000—have surpassed their recent highs and set new all-time highs.

"At the very least, I want to see a close over 4,810 to confirm the other indices," he said. "It could be a negative divergence." LaRosa explained that a divergence occurs when there's a rush of buying but one or two indexes do not follow. "Then there's a big selloff. The more time it takes to close above it, the more likely there's a correction."

LaRosa said he's surprised the Nasdaq has not surpassed its recent high already, and he noted his 12-month target has been at 5,100.

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"The Nasdaq is trading at a P/E of 22. The Nasdaq at 5,000, back in 2000, was trading at 100. It's a much better market. A much better market with a quality of earnings that is much better. It could trade at a P/E of 18 absolutely but in terms of a major market correction, I don't think there's a likelihood of it repeating the correction we had after the dot-com bubble," LaRosa said.

Leaders of the Nasdaq's rally in the past year have been American Airlines, up 109.3 percent; Electronics Arts, up 107.5 percent; Avago Technologies, up 91.6 percent; Keurig Green Mountain, up 80.7 percent, and Illumina, up 71.7 percent.

Since the Nasdaq peaked in 2000, its stocks that have gained the most are Monster Beverage, up 41,000 percent; Keurig Green Mountain, up 34,000 percent; Tractor Supply, up 6,993 percent, and Gilead up more than 4,200 percent.

Apple is up more than 2,400 percent, but Microsoft, a leader during the tech bubble, remains 6 percent below its March 2000 high. Intel is 38 percent below its March 2000 high, and Cisco is 58 percent below. The Nasdaq hit bottom in October 2002 at 1,139, a decline of 77 percent from the 2000 high.

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"I think Nasdaq is still the premier market for the U.S. because it's a showcase for technology and biotechnology companies. So I think if we have the healthy expansion that we're envisioning. In a reflationary world, tech and biotech do really well," said Lee.

Stocks on Monday were mixed, with the Dow taking a break from an eight-session winning streak. It lost 15 points to 18,038. The other indexes were higher and the Dow utilities and Russell 2000 both set new highs.

Some strategists are concerned the market's December gains are stealing from next year, and January could be a rough month as a result.

Lee disagrees. "I think we're going to start the year really strong. I know there's a lot of headwinds. There's oil and the capex implications of that. There's Europe and now we have this Greek election," said Lee. "I think they're not big enough headwinds to offset the positives. We've got really good labor market momentum. Consumer spending is really, really strong, and there's some comfort that the Fed is still going to be really supportive of the markets."

As for economic data Tuesday, traders are watching S&P/Case-Shiller home prices at 9 a.m. ET and consumer confidence at 10 a.m.

Traders are also watching oil prices. Energy stocks gained 0.3 percent even though oil futures declined.

Oil prices Monday fell to a new five-year low. West Texas Intermediate crude futures for February fell 2.1 percent to $53.61 per barrel. Brent was also sharply lower, despite an initial rally on concerns more supply will be disrupted from Libya.