Nasdaq Rallies, but Contraction in New 52-week Highs and Expansion of New Lows a Short-term Negative

The Nasdaq100 (NDX) was the only one of the major averages to finish with a
gain Monday, but it's noteworthy that Nasdaq internals were negative.
Declining issues outnumbered advancers, and new 52-week highs contracted while
new 52-week lows expanded. That's particularly noteworthy for the NASDAQ
considering the NDX put in higher highs and higher lows. This tells us that
while the index managed to settle higher on strength in selected issues, most
Nasdaq stocks failed to participate in Monday's advance. Historically, this
type of selective rally has led to a subsequently lower NASDAQ close within
the next few sessions. There have been a total of 25 occurrences over the past
decade in which the NDX posted a rally day despite fewer new highs and
increasing new lows on both exchanges. In 22 out of 25 cases, the NDX
proceeded to post a subsequently lower close within the next three days...

New Highs Contract, New Lows Expand on Rally Day
04/19/08... ???
04/10/08... Lower NDX close one session later
10/18/07... Lower NDX close one session later
09/24/07... No lower close within three sessions
04/17/07... Lower NDX close one session later
02/21/07... Lower NDX close three sessions later
11/08/06... Lower NDX close one session later
09/14/06... Lower NDX close three sessions later
05/08/06... Lower NDX close one session later
07/15/05... Lower NDX close one session later
05/24/05... Lower NDX close one session later
05/06/05... Lower NDX close two sessions later
02/08/05... Lower NDX close one session later
09/04/03... Lower NDX close one session later
07/30/02... Lower NDX close one session later
03/08/02... Lower NDX close one session later
06/07/01... Lower NDX close one session later
08/15/00... Lower NDX close one session later
07/17/00... Lower NDX close one session later
11/10/99... No lower close within three sessions
08/24/99... Lower NDX close three sessions later
01/07/99... Lower NDX close three sessions later
11/10/98... Lower NDX close two sessions later
07/13/98... Lower NDX close one session later
07/07/98... No lower close within three sessions
06/09/98... Lower NDX close one session later

S&P futures recovered from a down open to finish with a slight gain Monday,
although it appears the 'recovery' could only be temporary. As I noted in last
Thursday's column, a 'down open/up close' immediately after an unfilled upside
generally means the market is short-term overextended, and a lower close
typically follows within the next few sessions.

Another short-term negative sign is the fact that QQQQ volume hit its lowest
level in over two months Monday. As I noted back on April 8th when this also
occurred... "The absence of institutional firepower usually translates into a
subsequently lower QQQQ close within the next three sessions. Since 1999, this
setup has maintained an 85% accuracy level (39/46), well above the 65% at-any-
time odds."

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

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