Thoughts on the Nasdaq 100

Early in my career I traveled a lot for work. One trip I had the opportunity to attend a party a French bank was holding at the Rodin Museum in Paris. There was the famous Thinking Man statue, in fact several versions of it. It is a great Museum that you should not miss if you get to Paris. I started the week thinking and then writing about the renewed strength in equities. Sentiment changed at the end of last week and that sets up for a renewed run in equities. But just how strong will this move be? When you look at the Nasdaq 100 it could be just getting started. The chart of the Nasdaq 100 ETF ($QQQ) below tells the story.

The Nasdaq 100 broke out of a two month long consolidation at the beginning of the week when it gapped higher. And through the close Thursday it has just marched higher. Barring a 3% drop Friday it will print an new all-time monthly closing high for April. But just how high can it go? The break of the channel gives a Measured Move to 146.50, a full 10 points above where it is trading in the pre-market hours Friday. This comes from measuring the move into that 2 month consolidation and adding to the exit. Symmetry would look for that to happen toward the end of June.

But hold on, momentum is overbought right? it has to stop? The chart does show the RSI in technically overbought territory. But there is a saying in technical analysis, overbought can always get more overbought. In fact you only have to look back to January and the black line in the chart to see an example of that. This is when momentum first entered overbought territory on the last leg higher. The QQQ was at 123.50 then and continued to move higher to 1332.50 before it stopped. Overbought got more overbought.

The other momentum reading, MACD, seems to just be getting started. It crossed up, a buy signal, on Monday and is no where near the highs seen in late February. It may not be a straight run higher, but the QQQ could still have a lot of gas left in the tank.

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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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