Overbought or Flying to the Moon?

The Nasdaq 100 has led the markets higher since bottoming Christmas Eve. With an almost steady run higher, it is now within spitting distance of the all-time high from the fall. A 27% move off of the low. As always there are those that see it going much higher. And there are those waiting for the ‘inevitable’ drop. Looking just at the price action it is odd to see this kind of polarization though.

There have been a few pullbacks during this move higher. Nothing would suggest it has been a straight drive higher. They reset emotions and give a chance for those that missed to buy in. But the bearish sentiment seems to be entirely based outside of any price action, focusing on projected future earnings, and yield curves for bonds. It is like collectively they believe stock investors have it all wrong while economists and bond traders know better.

Many have been burned by assuming that past correlations will ALWAYS hold true. Anyone recall Long Term Capital Management? In markets anything can happen. There is no predestined path. The path higher has been the easier path since before the beginning of the year. Looking beyond price has left you watching from the sidelines.

In a vacuum, the price action in the Nasdaq 100 would suggest it has launched towards a price objective of at least 208 on the ETF $QQQ. Not much of a call for that in the media circles. But the Inverse Head and Shoulders pattern measures to there. Point and Figure traders are looking for 259. Will it take a new all-time high to change traders’ minds? We may soon find out. or maybe not.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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