Nasdaq 100 Inches Closer to All-Time High: Just 2% Away!

Q: Forward P/E and Operating Margin Expansion Support Valuation

According to Adam Turnquist, Chief Technical Strategist at LPL Financial, the elevated P/E ratio is mitigated by a significant anticipated increase in operating margins. Turnquist notes a jump from 18.0% in 2024 to 23.8% in 2025, further rising to 25.6% in 2026. This improvement in profitability, coupled with the ongoing AI-themed tailwinds, makes the current premium valuation easier to digest for investors.

Q: Invesco QQQ Trust (QQQ) Technical Indicators Affirm Positive Trend

The Invesco QQQ Trust, Series 1 (QQQ), which tracks the Nasdaq 100, is trading above both its short-term and long-term simple daily moving averages, signaling ongoing strength.

Published by Ecem EFE

5 June 2025, 13:23 published

Nasdaq vs. S&P 500: Key Support Levels Hint at New Uptrend

Nasdaq 100 Inches Closer to All-Time High – The Nasdaq 100 index is currently trading just under 2% away from its all-time high, prompting analysts to weigh in on the sustainability of its premium valuation. Despite a forward 12-month price-to-earnings (P/E) ratio of 26.6, which surpasses its 10-year average of 22.0, experts suggest that the current pricing is justified given robust growth expectations, particularly in the tech sector.

Forward P/E and Operating Margin Expansion Support Valuation

According to Adam Turnquist, Chief Technical Strategist at LPL Financial, the elevated P/E ratio is mitigated by a significant anticipated increase in operating margins. Turnquist notes a jump from 18.0% in 2024 to 23.8% in 2025, further rising to 25.6% in 2026. This improvement in profitability, coupled with the ongoing AI-themed tailwinds, makes the current premium valuation easier to digest for investors.

The tech-driven optimism is underpinned by strong corporate earnings reports, especially in sectors benefiting from artificial intelligence adoption and related capital expenditures, signaling sustained demand growth.

Broad-Based Buying Pressure Highlights Market Strength

Turnquist also emphasizes that buying pressure within the Nasdaq 100 is widespread rather than concentrated. Since the index’s low on April 8th, only eight stocks have declined, while the rest of the index has averaged gains of approximately 25%. This broad participation suggests healthy market breadth, which often precedes sustainable rallies.

Technical Momentum Signals Bullish Outlook

From a technical analysis perspective, the Nasdaq 100’s momentum remains bullish after a recent reset from overbought conditions. The index has rebounded strongly from a bear market in less than two months—a notable recovery pace.

This rebound was supported by several macroeconomic and policy developments, including the U.S. administration’s decision to delay reciprocal tariffs in April, positive trade negotiation progress, and solid earnings reports from major technology firms.

Turnquist points out that the Nasdaq 100 (NDX) versus S&P 500 ratio chart recently bounced off a key support level and reclaimed its 50-day and 200-day moving averages (dmas). A breakout above the July 2024 highs could confirm a new uptrend, indicating potential leadership by the Nasdaq over the broader market.

Invesco QQQ Trust (QQQ) Technical Indicators Affirm Positive Trend

The Invesco QQQ Trust, Series 1 (QQQ), which tracks the Nasdaq 100, is trading above both its short-term and long-term simple daily moving averages, signaling ongoing strength.

Key momentum indicators also support a bullish outlook:

The Relative Strength Index (RSI) stands at 58.97, comfortably within neutral territory, suggesting room for further upside without immediate overbought risk.
The Moving Average Convergence Divergence (MACD) line is at 3.90, positioned above its signal line. This alignment indicates that the 12-day exponential moving average (EMA) is above the 26-day EMA, reinforcing positive momentum.

These indicators collectively point toward sustained upward pressure on QQQ, consistent with the broader index trend.

Market Drivers: Policy, Earnings, and AI Demand

The Nasdaq 100’s recent rally reflects a confluence of factors. The U.S. government’s trade policy pivot in April, which delayed tariff escalations, helped restore investor confidence. Concurrently, trade negotiations progressed, easing concerns about international commerce disruptions.

Moreover, technology companies reported earnings that defied fears of a slowdown. Particularly, demand for artificial intelligence solutions and associated capital expenditures remained robust, suggesting that the tech sector’s growth story is intact.

Conclusion: A Balanced View on Nasdaq 100’s Premium Valuation

While the Nasdaq 100 trades at a premium relative to its historical P/E average, the anticipated surge in operating margins and strong sector fundamentals contribute to justifying this elevated valuation. Broad-based buying and supportive technical signals further bolster the case for sustained market strength in the near term.

Analysts will be watching closely for a potential breakout above recent highs, which could herald a new phase of Nasdaq leadership in the equity markets. However, as always, market participants remain attentive to evolving macroeconomic conditions and earnings trends that could influence the index’s trajectory.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrencies and stocks, particularly in micro-cap companies, are subject to significant volatility and risk. Please conduct thorough research before making any investment decisions.