The NASDAQ may be a bit overbought right now. Longer termed momentum signals on the weekly chart show a rounding over, and we’re seeing a bit of resistance at the top of the Bollinger bands. Mr. B’s famous bands are not squeezing right now, mind you, so its not likely a dire warning of a major bear movement. Lets call it more of a call for a healthy pullback. I might also note there that I pay more attention to momentum oscillators that use daily data, as I feel these tools serve best for shorter termed timing rather than big-picture calls. In the NAZ’s case, however, you can see that weekly stochastics and RSI can be reasonable indicators for turning points.
What’s got me wondering about the near termed action for the NAZ is the recent pullback on market darling AAPL. In September, AAPL was at around 19% weighting of the NAZ 100 index. Given the recent decline that weighting would be a bit lower now. Nevertheless, AAPL still holds significant influence on the NAZ. Take a look at the chart above. My trendline suggests that the stock went a wee bit parabolic earlier this year, and needs to either pullback or trade sideways for a while to allow the trendline to catch up with it. My guess is that AAPL might see near or below $600 before it resumes its merry way again. I’d rather see that happen sooner than later to ensure a healthy market. Seasonal influences should be kicking in for the tech sector very soon. And I’ve gotta admit – if the NAZ pulls back, and APPL with it – I’ll be entering my usual tech trades with as as much enthusiasm as always. But not until things settle down a little more.