Technical Commentary

July 28, 2009 (FinancialWire) — Dr. Joe Duarte (http://www.joe-duarte.com) recently noted: Last week’s rally took the Nasdaq 100 Index (NDX) and its proxy ETF, the Nasdaq 100 Trust (NASDAQ: QQQQ) to a very overbought condition, yet, if you look at two of the components of QQQQ, Google (NASDAQ: GOOG), and Research in Motion (NASDAQ: RIMM) are not as oberbought as other stocks, such as Intel (NASDAQ: INTC) and Apple (NASDAQ: AAPL).

Duarte added: The Nasdaq is at an important junction, as overbought markets can rally for a much longer time than anyone can usually predict.  One of the most dramatic momentum runs of all time was the last six months of the Internet bubble, the period from September 1999 to March 2000. The Nasdaq rose 86.4% during the period, and it seemed as if the market would never fall again. Of course it did, and the Nasdaq Composite, despite a nifty rally since March, is still off 65% from its March 2000 peak.

In other words, we could see some backing and filling in the next couple of days as the market has come a long way in a short period of time. But momentum markets take short breathers, and do feature both sector and individual stock rotations.

Thus, the key, over the next couple of days, is to see which way this overbought condition will resolve. If it breaks down, we could see lower prices in the short term. If things move sideways, we would expect a rotation away from the stocks that have been hot, to the relative laggards.

Duarte’s conclusion: Momentum is a double-edged sword. When it’s going your way, it feels good. The problem is that it’s not going to last forever. And the damage, not to mention the hangover could both be devastating and long lasting. The bottom line is that it’s too soon to call for a top in this rally.

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Duarte partners with the Investors Resource Center at Investrend Information (http://www.investrendinformation.com).

Duarte’s IntelligentForecasts.com (http://www.intelligentforecasts.com) provides free news coverage and analysis, and his daily articles and news summaries offer recommendations and analysis for ETFs, and individual stocks in the technology, health and biotechnology, and energy sectors. Duarte has combined expertise in health care, energy, and the effects of politics and global intelligence on the financial markets offer a unique blend of insight and information to thousands of active investors and political and intelligence aficionados around the world on a daily basis.

He is the author of: Futures And Options For Dummies, Successful Energy Sector Investing, Successful Biotech Investing and co-author of After-Hours Trading Made Easy. In early 2001, in Successful Energy Sector Investing, he correctly predicted that Venezuela’s political problems could lead to an energy crisis in the United States. He has also appeared as a weekly guest on Market Mavens Radio and has logged appearances on KNX radio in Los Angeles, Financial Sense.com radio, and Wall Street Radio.

One of CNBC’s original Market Mavens, Dr. Duarte has been writing about the financial markets since 1990. His articles and commentary have been featured on CBS Marketwatch, Barron’s, Smart Money, Medical Economics, and in Technical Analysis of Stocks and Commodities magazines. In 2003, Doctor Duarte received second place, in the professional section, of the Medical Economics Investment Challenge with a 12-month return of 42%.

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