Despite Lower Closes, Three Up Opens for Nasdaq Futures has Positive Implications

NYSE TICK action remained positive Monday despite the slightly lower close for
the major averages. TICKscore closed at +8, cumulative TICK +51,400. Volume
was light, coming in at a two-week low on both the NYSE and NASDAQ. Note that
the two-week buy setup discussed in Sunday’s column was triggered today.

NASDAQ futures started on an upbeat note but settled lower Monday, the third
day in a row that this pattern of an up open/down close has repeated. Looking
back to when NDX futures began trading in 1996, we find a total of 21 separate
instances in which the front-month contract opened higher but settled lower
three consecutive sessions…

NASDAQ Futures Open Higher, Settle Lower Three Consecutive Days
07/21/08… Nasdaq futures ??? one week later
12/22/06… Nasdaq futures +0.9% one week later
06/13/06… Nasdaq futures +2.4% one week later
04/11/06… Nasdaq futures +1.4% one week later
12/28/05… Nasdaq futures +2.5% one week later
12/19/05… Nasdaq futures +0.2% one week later
10/11/05… Nasdaq futures +0.1% one week later
07/01/05… Nasdaq futures +3.8% one week later
03/22/05… Nasdaq futures +1.7% one week later
02/09/05… Nasdaq futures +2.4% one week later
07/19/04… Nasdaq futures -1.6% one week later (*)
03/10/04… Nasdaq futures +1.0% one week later
02/23/04… Nasdaq futures +1.6% one week later
06/23/03… Nasdaq futures -0.0% one week later
02/28/02… Nasdaq futures +11.1% one week later
09/18/00… Nasdaq futures +0.5% one week later
08/03/99… Nasdaq futures -3.6% one week later (*)
08/04/98… Nasdaq futures +1.2% one week later
05/26/98… Nasdaq futures -1.6% one week later (*)
12/31/96… Nasdaq futures +4.2% one week later
10/28/96… Nasdaq futures +2.3% one week later
06/18/96… Nasdaq futures +0.2% one week later

Note that in the majority of cases, the NASDAQ shrugged off the seemingly weak
price action over the course of the following week. Only three times was the
NDX down more than 1% one week later, while it was up more than 1% a total of
twelve times, indicating that the string of ‘up opens’ hints at underlying
buying power. While NASDAQ futures are trading sharply lower Monday evening to
the tune of nearly 2%, this study suggests it could very well turn out to be a
bear trap.

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

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