As equities recovered losses from Wednesday’s FOMC meeting with strong gains yesterday, the major index ETFs have made another move towards overbought levels. Five index ETFs are neutral, while the other nine are overbought with one of these now to an extreme degree. Small and mid caps continue to lag behind their larger cap peers. Each of these ETFs in addition to the Dow (DIA), while still positive, have only seen modest gains of under 1% relative to other large cap ETFs gains which are all up well over 1%. The Nasdaq (QQQ) continues to blow the rest of the market out of the water with almost double the returns of the next best ETF over the last week. QQQ is up 3.5%, but these gains come with a cost as it is now in extreme overbought territory, sitting 7.57%, or more than 2 standard deviations, above its 50-DMA.
The Nasdaq’s strength comes thanks to the Technology sector (XLK). On top of outperforming YTD with a gain of over 21%, it is now up 3.79% this week and at extreme overbought levels. Additionally, Consumer Discretionary (XLY) has also rallied over 3% in the past 5 days bringing it to extremely overbought levels as well. In spite of these two sector’s outstanding performance, no other sector has managed to edge out gains that are as impressive. For example, the next best performing sector is Energy (XLE) which is only up 1.88%. On the other hand, Financials (XLF) have gotten hammered thanks to less favorable rates. The sector is now down 1.96% this week falling all the way back to its 50-DMA after sitting just barely below overbought levels last Friday.