The NASDAQ-100 Index (often known by its ticker symbol, NDX), home to many of the mega-cap Tech-related Growth stocks that have dominated the US stock market this year, has seen some corrective action this month. A common question we hear is: is the correction enough to say the NDX is no longer “stretched” after its historic surge through the end of August?
The chart below provides some context. For four different indices, it plots the percentage difference between the current index level and its 200-day moving average, a common measure of the longer-term trend. Excessive deviations from the 200-day average are often viewed as signals of extreme investor behavior that are likely to revert back toward the average.