Hi AP,
You are right, all the indexes and many stocks are relatively overbought, but the key word there is relatively.
OB/OS is by nature a relative dichotomy and has limited absolute meaning.
OB/OS to me is only useful during the middle of a trend. At the pivots, and wherever there is a significant change in momentum, OB/OS approaches meaninglessness, because they are in the process of being redefined.
So, when we are at the beginning of a correction, everything gets oversold, and stays there, and gets even more oversold; that is the manifestation of the trend change.
Similarly, now we are in the early part of a trend change, from a medium-term correction to a resumption of the long-term uptrend. So we can expect a strong bias towards overbought conditions; that is one of the manifestations of the trend shift, and the increasing upwards momentum, and is reflected very definitely in the momentum indicators.
So, OB will be tolerated much longer and to a greater extent than would have been the case 2 months ago, say.
Now... all that said, I expect a bit of correction beginning today. But it will be quite limited, and we will not see selling that will take the indices to the oversold conditions we have been accustomed to over the past few months. Reversal to the upside will occur significantly before those oversold levels are reached.
The most likely reversal point for QQQQ is support at just under $36 (about $35.95).
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