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Is the Nasdaq Oversold?

David Becker
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Is the Nasdaq Oversold?

The Nasdaq Exchange has been one of the hardest hit in the latest downturn. While the Dow Jones Industrial Average was hitting new highs and the S&P 500 kept retesting the 1885 level, the Nasdaq Composite kept dropping. This week, the market had three strong opportunities to let go. All three days had significant lows below the 20 day moving average and on two of three days, new buyers stepped in and closed near the highs for the day. Buyers appeared to be showing up to buy at these levels. Support sits at 4020. The RSI which is usually a key indicator to determine overbought and oversold level is printing in the mid 30s which is the low end of the neutral range.

The Nasdaq internals are at common reversal levels if we can get some upward momentum The Nasdaq Large Cap 100 stocks ($NDX) appears to confirm that opinion with some of the stocks in the index now turning up and see full buy signals which triggered the change in the Bullish Percent Indicator. This change in trend for the large caps is promising, but only if the rest eventually turn.


Strong stocks are probably turning higher already to make the $BPNDX turn up. With the Number Of Nasdaq Stocks Making 52 Week Lows one can see that this is an infrequent event to see the number of lows spike up to 130. The frequency is low enough to suggest a bounce coming soon in the Nasdaq. If this is like 2010, the market will grind sideways, but strong stocks should hold up. If it is like 2012, these were excellent buying points. If it is like 2011, we probably have another strong rally in us before the bulls are interested in getting more defensive.

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