Nasdaq 100’s Sizzling Run to Record Flashes Warning
- RSI shows index is highly overbought, typically a sell signal
- Solid earnings from big tech, Fed’s dovish talk helped rally
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The tech-heavy Nasdaq 100 Index is showing serious signs of overheating, an indication that a selloff might be right around the corner.
After surging 10% in the past month, the benchmark -- home of the likes of Apple Inc., Amazon.com Inc. and Microsoft Corp. -- has seen its relative strength indicator, a 0-100 gauge of bullish and bearish price momentum, soar to 78, well into overbought territory. That’s seen by traders as a contrarian signal that a decline is imminent, because buying has gotten excessive. Four of the last five times the indicator hit such a level, the Nasdaq 100 shed 12% or more to the ensuing low.