ASX Trader: I visited NASDAQ and the warning signs are flashing red everywhere

Step back from the excitement inside the NASDAQ and the numbers flash red. Investors should brace for turbulence in September. I wouldn’t touch it with a ten-foot pole, writes ASX Trader.

ASX Trader at the NASDAQ.

Last week, I had the chance to tour the iconic NASDAQ exchange in New York, a dream for anyone in markets.

The building buzzed with energy, screens alive with data and deals.

But step back from the excitement, and the numbers flash red: the NASDAQ looks extremely expensive right now.

For my long-term account, I wouldn’t touch it with a ten-foot pole.

That said, it doesn’t mean the index can’t deliver phenomenal gains in the next 12 months, parabolic rallies often surprise on the upside before they finally cool off, which I’m expecting it too some time in 2026 as I’ve written before.

ASX Trader in News Corp papers and (inset) at the Nasdaq.

Why it’s overvalued but not a shorting opportunity

There are countless signs right now that the market is stretched.

No matter which yardstick you look at, profits, assets, or history the story is the same: stocks are more expensive than ever.

By some measures, even pricier than during the dot-com boom or before the Great Depression.

That doesn’t mean a crash is about to hit tomorrow.

But it does mean long-term investors shouldn’t expect the kind of 20 per cent per year gains we’ve seen from tech in the past decade.

And no, I wouldn’t short it either.

You don’t short a raging bull.

Momentum can carry on far longer than logic suggests.

There’s an old saying in markets: “Prices can stay irrational longer than you can stay solvent.” Once you’ve been around a while, you realise just how true that is.

Markets can climb far higher than anyone thinks possible, and when the tide finally turns, they can also sink much lower than people expect.

That’s why betting against this bull is dangerous but it’s just as risky to assume today’s sky-high valuations will keep compounding smoothly forever.

The book value warning on the S&P 500

Beyond the NASDAQ, there’s another flashing warning sign across the broader market: the S&P 500’s price-to-book ratio (which compares stock prices to the net assets companies actually own).

Right now, that ratio is sitting at an all-time high of 5.3.

That means the average stock in the S&P 500 is priced at 530 per cent higher than what the average company is worth on paper.

To put it in perspective, this makes today’s market more expensive on a book-value basis than 1929 before the Great Depression, and more stretched than the dot-com boom that ended in a crash.

It doesn’t guarantee a collapse, but it does show how extreme valuations have become, leaving little margin for error if profits disappoint.

The price-to-book value ratio. Photo: Elliott Wave International

September: The seasonally weakest month

Beyond valuations, there’s another reason to be cautious: seasonality.

• Since 1928, the S&P 500 has averaged a negative return in September, making it the weakest month of the year.

• The NASDAQ Composite also averages a nearly 0.9 per cent decline in September.

• In the past 35 years, September has consistently ranked among the worst stretches for stocks.

Markets may look calm now, but history says to brace for turbulence as we enter Spring.

September is an historically soft month.

Technical signals are flashing too

It isn’t just the seasonality waving red flags.

On the weekly charts (each candle is worth 1 week), the stochastic RSI is overbought and has just crossed bearish.

Historically, that setup has often preceded short-term multi week corrections, not full-blown crashes, but enough downside to shake out weaker hands.

When you combine stretched valuations with technical indicators rolling over, the risk of a near-term pullback grows stronger.

The technical signals are flashing.

Touring the NASDAQ was unforgettable, but step back and the picture is clear: the market is pricey on almost every measure on long term metrics.

I’m not predicting a crash as this bull could still charge higher but I personally wouldn’t touch it with a ten-foot pole for my long-term account.

In the near term, September has a track record as the weakest month for stocks, and the weekly charts are hinting at possible cracks.

As the saying goes: you don’t short a raging bull, but you don’t expect it to run forever either. Heading into September, the smart move is caution.