The Nasdaq could be primed for huge gains after reaching a dire milestone, history shows

Published Thu, Oct 13 202212:42 AM EDTUpdated Tue, Nov 8 20227:04 AM EST

The Nasdaq Composite is performing at one of its most "miserable" levels ever and one not seen in more than a decade, according to Sundial Capital Research. The good news: That usually gives way to an upswing. The composite was down for the fifth day in a row on Tuesday. It's down more than 30% so far this year, and also hit a new two-year low. It's the first time these three indicators have flashed together since the 2008 recession. And it's only the sixth time since the composite launched in 1971. "The Nasdaq has entered elite company, joining the most miserable markets ever," Jason Goepfert, chief research officer of Sundial Capital Research, said in a Tweet . Sundial does business as SentimenTrader.com, where the data was posted. Bounce back Historically, the Nasdaq typically bounces back after these three conditions are met. In five previous instances, one week later the index was always higher and the median gain 5.3% . One year later, the median gain was 20.3%, but the dispersion was greater, with two instances down and three up from what Goepfert dubbed the original point of "misery." After 2008, the gain one year later was 40.5% while in 1973 the loss one year later was 34.3%. To be sure, there were infrequent times when the index would trade down over the course of each year. But the data aligns with general sentiment that a bear market often – though not always – leads to a bounce back. Historical points The last time these signals were triggered was in the midst of the Global Financial Crisis, in October 2008, when they flared up twice in the same month. Before that, the three conditions were met in September 2001, shortly after markets reopened following the 9-11 attacks; in 1974, a few weeks after President Nixon's resignation; and in late 1973 in the midst of the Arab oil embargo that followed the Yom Kippur War. Interestingly, all six instances occurred in the final four months of the year: twice in September, three times in October and once in December.