Nasdaq May Catch QE Fatigue Thanks to Google

NEW YORK (TheStreet) -- The stock market rebounded this week negating potential negative weekly closes for the major equity averages except the Nasdaq. The Nasdaq needs to close above 3089 to avoid having a negative weekly chart.

The other majors would have to sink Friday to close below their key levels. If it wasn't for the Google (GOOG)-effect on the Nasdaq, QE fatigue might be considered in remission. This would not eliminate the downside risk, but is a indication that the Dow Industrial Average and S&P 500 can stretch QE hype toward their October 2007 highs.

Strength this week has the major equity averages straddling their monthly value levels, pivots and risky levels, which sets the overall neutral trading range. The Dow Industrial Average moved above its monthly pivot at 13,506 with the S&P below its monthly pivot at 1468.0. Dow Transports and Russell 2000 are above their monthly pivots at 4859 and 827.70 respectively. The Nasdaq provides the monthly risky level at 3210.

Google fell off its fiscal cliff at 12:30 p.m. Thursday with a premature earnings report that was a considerable disappointment. Google could thus be the carrier of "QE3 fatigue" spreading the contagion to the Nasdaq. If the tech-heavy average ends the week below its five-week modified moving average at 3089 its weekly chart would shift to negative.

At www.ValuEngine.com Google was upgraded to a buy on Wednesday for the rally to $755.49, but then downgraded to a hold for Thursday's open. With Thursday's close at $695.00 the stock is upgraded back to a buy. My quarterly value level is $615.86 with quarterly and monthly pivots at $713.85 and $720.41.

Friday morning we show that 52.3% of all stocks are undervalued with 47.7% overvalued. Fourteen of 16 sectors are overvalued led by construction by 18.2%, medical by 16.1%, retail-wholesale by 14.3%, consumer staples by 14.2%, utilities by 13.4% and finance by 13.2%

Analysis of the Yield on the 10-Year Treasury Note (1.831): The weekly chart has shifted back to showing risk to higher yields given a close Friday with the yield above the five-week modified moving average at 1.684%. My quarterly and annual value levels 2.109% and 2.502% with my semiannual pivot at 1.853% and monthly and semiannual risky levels at 1.681% and 1.389%.

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