NASDAQ/NYSE Volume Ratio Closes Above 1.75

After seven weeks, the Investors Intelligence survey has finally registered a
Bearish Consensus back under 35%, closing out the intermediate-term bullish
setup triggered in mid-march. As I noted on March 12th, "a Bearish Consensus
reading above 40% has positive implications from a contrarian perspective,
given that this statistic usually oscillates in the 20-40% range. While it has
run up as high as 50%+, a reading of 40% or more usually means sellers are at
or near an intermediate- term exhaustion point. The stock market has a strong
tendency to bottom out and begin rallying in the weeks following such an
extreme reading."

Interesting to note that while cumulative breadth is making new highs along
with the market, the 20-day moving average of the NYSE Cumulative TICK is
making a series of lower highs and is not confirming the recent push above SPX
1400. The weak TICK action is also reflected in the longer-term chart of the
NYSE TICKscore. Note that the cumulative line is nowhere near its levels from
February, primarily due to an absence of big positive readings. In the last
three months, we've only seen a single session with a closing TICKscore over
+30, a sign that the big institutional buyers remain cautious.

Echoing that theme, principal program activity (expressed as a percentage of
total program volume) slipped to a fresh five-year low this past week,
continuing the negative trend of declining institutional participation that
began in mid-2007.

NYSE volume fell off sharply Friday while NASDAQ volume remained above
average, sending the NASDAQ/NYSE Volume Ratio soaring to 1.76, its highest
reading of the year. In the table below I've listed the last thirty separate
instances in which this ratio closed over 1.75, along with the performance of
the Nasdaq100 over the following week...

Nasdaq/NYSE Volume Ratio over 1.75
05/02/08... Nasdaq100 ??? one week later
10/30/07... Nasdaq100 +0.7% one week later
10/26/07... Nasdaq100 +0.9% one week later
10/23/07... Nasdaq100 +0.1% one week later
10/12/07... Nasdaq100 -2.2% one week later
10/08/07... Nasdaq100 -0.2% one week later
03/02/04... Nasdaq100 -2.4% one week later
12/31/03... Nasdaq100 +4.3% one week later
11/29/02... Nasdaq100 -4.5% one week later
07/01/02... Nasdaq100 -0.9% one week later
05/14/02... Nasdaq100 -3.8% one week later
06/08/01... Nasdaq100 -10.3% one week later
05/21/01... Nasdaq100 -8.7% one week later
05/02/01... Nasdaq100 -4.4% one week later
04/19/01... Nasdaq100 -9.7% one week later
04/11/01... Nasdaq100 +18.6% one week later
04/03/01... Nasdaq100 +14.2% one week later
03/09/01... Nasdaq100 -9.1% one week later
03/06/01... Nasdaq100 -9.4% one week later
03/02/01... Nasdaq100 -3.6% one week later
02/28/01... Nasdaq100 +4.6% one week later
02/22/01... Nasdaq100 -3.2% one week later
02/15/01... Nasdaq100 -13.3% one week later
02/09/01... Nasdaq100 -2.2% one week later
02/07/01... Nasdaq100 -4.3% one week later
01/17/01... Nasdaq100 +6.6% one week later
01/10/01... Nasdaq100 +10.6% one week later
12/15/00... Nasdaq100 -4.4% one week later
12/08/00... Nasdaq100 -12.0% one week later
12/05/00... Nasdaq100 +0.4% one week later
11/22/00... Nasdaq100 -6.1% one week later

Note that the Nasdaq has been twice as likely to trade lower over the next
five trading days. In only six cases out of the last thirty did the NDX gain
1% or more, while it lost 1% or more eighteen times. Also interesting to note
that 70% of the time, the NDX gained or lost at least 3% the next week,
suggesting the potential for an outsized move.

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

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