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Buzz and Banter



Earlier today, we mentioned that the percentage of NDX stocks overbought was 73% and that a reading over 70% has led to a consolidation period since the rally began in March. We found there have been five prior readings over 70%. Each reading was followed by a multi-week correction in the NDX.
The average decline was 4% over 14 trading days. Each correction was also followed by more upside.

Bottom line: The returns after 70% of the NDX components become overbought don't argue for significant downside, but also don't argue for further upside until some consolidation takes place.

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