NASDAQ Overbought/Oversold Indicator

This morning, our Asset Allocation Model remains solidly where it's been the past few weeks, which you can see below.

Last week, we took a look at the 21-Day Oscillator, which was showing an overbought stock market.  If you missed that post, you can read it by clicking here.  Today, I want to look at the NASDAQ Overbought/Oversold indicator.

What you see in the chart above is good news and bad news.  With this overbought level, history shows that it typifies powerful buying, and over many years, it has been a prelude to an ensuing strong stock market in the years ahead.  But if you just look at the last few years as an example, you will see that even though the market does continue to move up sometimes (like in January 2012), the ensuing correction in the months ahead gives you opportunities to reinvest your assets at lower and calmer environments.

That is one reason to remain true to our discipline - as suggested by our Asset Allocation Model.  So all told, we continue to be excited about this stock market and its upside potential in the years ahead.

Don Hays

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