Nasdaq Breadth Settles 3:1 Negative, But Downside Volume Less than 80% of Total NASDAQ Volume

S&P futures traded as low as 1370.80 on Tuesday, filling the weak upside gap
from a couple of days back. As noted in Sunday's column, the fact that the
futures settled below the open last Friday was a good indication of waning
upside momentum. The Nasdaq closed with solid losses as well Tuesday, not
surprising given Monday's expansion in new 52-week lows and contraction in new
52-week highs.

With short-term targets fulfilled, there isn't a whole lot to lean on,
although Tuesday's market internals on the NASDAQ exchange were noteworthy.
While breadth was decidedly negative by a 3:1 margin, downside volume was
relatively light at only 75% of total volume. That's a subtle clue that
selling pressure wasn't particularly intense. The last twenty times that
NASDAQ breadth closed 3:1 negative and down volume was less than 80% are noted
in the table below...

Nasdaq Breadth 3:1 Negative, Less than 80% Down Volume
04/22/08... ???
03/17/08... Higher NDX close three sessions later
10/12/05... Higher NDX close three sessions later
02/09/05... Higher NDX close three sessions later
07/08/04... No higher close 3-5 trading days later
02/04/04... Higher NDX close three sessions later
10/22/03... Higher NDX close four sessions later
07/17/03... Higher NDX close three sessions later
09/23/02... Higher NDX close three sessions later
07/23/02... Higher NDX close three sessions later
12/20/00... Higher NDX close three sessions later
11/20/00... Higher NDX close three sessions later
05/10/00... Higher NDX close three sessions later
04/12/00... Higher NDX close four sessions later
04/04/00... Higher NDX close three sessions later
10/08/98... Higher NDX close three sessions later
10/07/98... Higher NDX close three sessions later
10/05/98... Higher NDX close five sessions later
08/26/98... No higher close 3-5 trading days later
12/18/95... Higher NDX close three sessions later
04/08/92... Higher NDX close three sessions later

In this same period of time, there were a total of 98 sessions in which NASDAQ
breadth was 3:1 negative. That means about 4 out of 5 occurred on better than
80% downside volume. When this wasn't the case, there's been a notable
tendency for the NDX to bottom out over the short-term and close at a higher
level 3-5 trading days later.

We should also keep in mind that from an intermediate-term perspective, the
S&P recently triggered a bullish setup by closing higher three days after the
big 5:1 positive breadth session from last Wednesday. Historically, the S&P
has a solid track record of continuing to move generally higher in the two
weeks following this setup. The last thirty times the S&P has closed higher
three days after a 3:1+ positive breadth day are noted in the table below,
beginning with the date of the lopsided breadth session and the date three
sessions later when the S&P closed higher. In 25 out of 30 cases, the S&P was
higher ten trading days later. That 83% win rate is significantly better than
the 58% at-any-time odds for a higher S&P two weeks later. And note this setup
has maintained an 80% win rate stretching back to 1995...

S&P500 Higher Three Days After 3:1 Positive Breadth
04/16/08-04/21/08 S&P up... S&P ??? two weeks later
04/01/08-04/04/08 S&P up... S&P +1.5% two weeks later
03/18/08-03/24/08 S&P up... S&P +1.7% two weeks later
01/28/08-01/31/08 S&P up... S&P -2.2% two weeks later
11/28/07-12/03/07 S&P up... S&P -1.8% two weeks later
11/23/07-11/28/07 S&P up... S&P +1.2% two weeks later
10/05/07-10/10/07 S&P up... S&P -3.0% two weeks later
09/18/07-09/21/07 S&P up... S&P +2.1% two weeks later
08/31/07-09/06/07 S&P up... S&P +2.7% two weeks later
08/29/07-09/04/07 S&P up... S&P +2.0% two weeks later
08/22/07-08/27/07 S&P up... S&P +0.3% two weeks later
08/17/07-08/22/07 S&P up... S&P +1.0% two weeks later
07/02/07-07/06/07 S&P up... S&P +0.2% two weeks later
06/27/07-07/02/07 S&P up... S&P +2.0% two weeks later
06/13/07-06/18/07 S&P up... S&P -0.8% two weeks later
05/11/07-05/16/07 S&P up... S&P +1.1% two weeks later
05/02/07-05/07/07 S&P up... S&P +1.0% two weeks later
04/20/07-04/25/07 S&P up... S&P +1.1% two weeks later
03/21/07-03/26/07 S&P up... S&P +0.8% two weeks later
03/19/07-03/22/07 S&P up... S&P +0.6% two weeks later
03/06/07-03/09/07 S&P up... S&P +2.4% two weeks later
11/29/06-12/04/06 S&P up... S&P +0.9% two weeks later
10/12/06-10/17/06 S&P up... S&P +1.0% two weeks later
10/04/06-10/09/06 S&P up... S&P +2.0% two weeks later
09/12/06-09/15/06 S&P up... S&P +1.2% two weeks later
08/15/06-08/18/06 S&P up... S&P +0.7% two weeks later
07/24/06-07/27/06 S&P up... S&P +0.7% two weeks later
07/19/06-07/24/06 S&P up... S&P +0.8% two weeks later
04/18/06-04/21/06 S&P up... S&P +1.1% two weeks later
01/03/06-01/06/06 S&P up... S&P -1.7% two weeks later
10/31/05-11/03/05 S&P up... S&P +1.9% two weeks later

Categories : Archived EOD Commentary, End-of-Day Commentary

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