Nasdaq Closes Up over 1.5%, But Negative Breadth a Bearish Indication for Following Week
By
Rennie on Thursday, September 11th, 2008 at 9:30 pm
TICKscore closed at -24 Thursday, Cumulative TICK -44,000. Note that the
cumulative TICKscore is on the verge of breaking its July low, continuing the
long-term pattern of lower lows that began in the summer of 2007 (see long-
term chart).
Today’s rally fulfilled the short-term bullish setups discussed recently,
leaving nothing on the board short-term. That leaves the market in a
vulnerable position, given the SPY volume setup discussed in Wednesday’s
column along with the generally negative action seen Thursday. While the major
averages rebounded from a steep morning selloff to settle with solid gains,
this type of action is not typically conducive to further upside short-term.
Consider that today represented only the fifteenth time since 1990 that the
Dow Industrials rebounded from down over 100 points intraday to closing with a
gain of over 100 points. While that might sound like a bullish development,
this type of action usually leads to a resumption of the downtrend over the
next couple of sessions…
Dow Down 100+ Intraday, Closes Up 100+
09/11/08… Dow two days later
01/31/08… Dow -15 two days later
01/23/08… Dow -63 two days later
01/10/08… Dow -75 two days later
08/14/02… Dow +35 two days later
07/24/02… Dow +73 two days later
05/01/02… Dow -53 two days later
10/25/01… Dow -193 two days later
08/10/01… Dow -4 two days later
05/04/01… Dow -68 two days later
03/09/00… Dow -64 two days later
08/05/99… Dow -86 two days later
10/02/98… Dow -42 two days later
09/01/98… Dow -145 two days later
10/28/97… Dow -117 two days later
The Nasdaq100 also managed a solid gain Thursday, but not the influential
semiconductor sector. The SOX only managed a small 0.6% gain, less than half
of the 2% rally for the NDX. In the table below I’ve listed every case since
2000 in which both the NDX and SOX closed up at least 0.5%, but the NDX more
than doubled the gain of the SOX. Note that in 16 out of 19 instances, the
Nasdaq closed at a lower level two sessions later. Even when the Nasdaq
managed to continue moving higher, gains amounted to 0.5% or less in every
case but one, suggesting limited upside potential as we head into early next
week…
NDX & SOX +0.5% or more & NDX Doubles SOX Gain
09/11/08… Nasdaq ??? two days later
07/25/08… Nasdaq -0.1% two days later
07/08/08… Nasdaq -1.7% two days later
10/05/07… Nasdaq +1.0% two days later (*)
08/24/07… Nasdaq -3.2% two days later
02/27/06… Nasdaq -0.1% two days later
04/25/05… Nasdaq -0.9% two days later
10/18/04… Nasdaq -0.3% two days later
07/27/04… Nasdaq +0.5% two days later
12/01/03… Nasdaq -1.9% two days later
09/18/03… Nasdaq -2.4% two days later
03/25/03… Nasdaq -0.4% two days later
04/08/02… Nasdaq -2.1% two days later
05/02/01… Nasdaq -2.0% two days later
05/01/01… Nasdaq -2.2% two days later
03/27/01… Nasdaq -9.9% two days later
01/23/01… Nasdaq -4.9% two days later
08/24/00… Nasdaq +0.1% two days later
06/30/00… Nasdaq -3.0% two days later
05/05/00… Nasdaq -6.6% two days later
Breadth also ended in negative territory on both exchanges, a generally
negative sign coming on what would otherwise appear to be a solid up day. When
breadth doesn’t back up a rally, chances are it’s on shaky ground. In recent
years particularly, a 1.5%+ rally for the Nasdaq100 that’s accompanied by
negative breadth has had bearish implications for the following week. Out of
14 occurrences since 2001, all but one led to lower prices over the following
week…
Nasdaq100 +1.5% on a Negative Breadth Day
09/11/08… Nasdaq ??? one week later
01/09/08… Nasdaq -3.9% one week later
08/06/07… Nasdaq -1.0% one week later
03/07/05… Nasdaq -1.9% one week later
07/22/04… Nasdaq -0.7% one week later
01/29/03… Nasdaq -4.7% one week later
07/15/02… Nasdaq -8.0% one week later
07/11/02… Nasdaq -0.3% one week later
07/03/02… Nasdaq +0.2% one week later
06/24/02… Nasdaq -5.6% one week later
06/12/02… Nasdaq -2.3% one week later
06/04/02… Nasdaq -6.6% one week later
04/01/02… Nasdaq -5.8% one week later
03/22/01… Nasdaq -8.2% one week later
03/05/01… Nasdaq -12.3% one week later
03/01/01… Nasdaq -1.5% one week later
02/14/01… Nasdaq -11.9% one week later
Nasdaq Closes Up over 1.5%, But Negative Breadth a Bearish Indication for Following Week
By Rennie on Thursday, September 11th, 2008 at 9:30 pmTICKscore closed at -24 Thursday, Cumulative TICK -44,000. Note that the
cumulative TICKscore is on the verge of breaking its July low, continuing the
long-term pattern of lower lows that began in the summer of 2007 (see long-
term chart).
Today’s rally fulfilled the short-term bullish setups discussed recently,
leaving nothing on the board short-term. That leaves the market in a
vulnerable position, given the SPY volume setup discussed in Wednesday’s
column along with the generally negative action seen Thursday. While the major
averages rebounded from a steep morning selloff to settle with solid gains,
this type of action is not typically conducive to further upside short-term.
Consider that today represented only the fifteenth time since 1990 that the
Dow Industrials rebounded from down over 100 points intraday to closing with a
gain of over 100 points. While that might sound like a bullish development,
this type of action usually leads to a resumption of the downtrend over the
next couple of sessions…
Dow Down 100+ Intraday, Closes Up 100+
09/11/08… Dow two days later
01/31/08… Dow -15 two days later
01/23/08… Dow -63 two days later
01/10/08… Dow -75 two days later
08/14/02… Dow +35 two days later
07/24/02… Dow +73 two days later
05/01/02… Dow -53 two days later
10/25/01… Dow -193 two days later
08/10/01… Dow -4 two days later
05/04/01… Dow -68 two days later
03/09/00… Dow -64 two days later
08/05/99… Dow -86 two days later
10/02/98… Dow -42 two days later
09/01/98… Dow -145 two days later
10/28/97… Dow -117 two days later
The Nasdaq100 also managed a solid gain Thursday, but not the influential
semiconductor sector. The SOX only managed a small 0.6% gain, less than half
of the 2% rally for the NDX. In the table below I’ve listed every case since
2000 in which both the NDX and SOX closed up at least 0.5%, but the NDX more
than doubled the gain of the SOX. Note that in 16 out of 19 instances, the
Nasdaq closed at a lower level two sessions later. Even when the Nasdaq
managed to continue moving higher, gains amounted to 0.5% or less in every
case but one, suggesting limited upside potential as we head into early next
week…
NDX & SOX +0.5% or more & NDX Doubles SOX Gain
09/11/08… Nasdaq ??? two days later
07/25/08… Nasdaq -0.1% two days later
07/08/08… Nasdaq -1.7% two days later
10/05/07… Nasdaq +1.0% two days later (*)
08/24/07… Nasdaq -3.2% two days later
02/27/06… Nasdaq -0.1% two days later
04/25/05… Nasdaq -0.9% two days later
10/18/04… Nasdaq -0.3% two days later
07/27/04… Nasdaq +0.5% two days later
12/01/03… Nasdaq -1.9% two days later
09/18/03… Nasdaq -2.4% two days later
03/25/03… Nasdaq -0.4% two days later
04/08/02… Nasdaq -2.1% two days later
05/02/01… Nasdaq -2.0% two days later
05/01/01… Nasdaq -2.2% two days later
03/27/01… Nasdaq -9.9% two days later
01/23/01… Nasdaq -4.9% two days later
08/24/00… Nasdaq +0.1% two days later
06/30/00… Nasdaq -3.0% two days later
05/05/00… Nasdaq -6.6% two days later
Breadth also ended in negative territory on both exchanges, a generally
negative sign coming on what would otherwise appear to be a solid up day. When
breadth doesn’t back up a rally, chances are it’s on shaky ground. In recent
years particularly, a 1.5%+ rally for the Nasdaq100 that’s accompanied by
negative breadth has had bearish implications for the following week. Out of
14 occurrences since 2001, all but one led to lower prices over the following
week…
Nasdaq100 +1.5% on a Negative Breadth Day
09/11/08… Nasdaq ??? one week later
01/09/08… Nasdaq -3.9% one week later
08/06/07… Nasdaq -1.0% one week later
03/07/05… Nasdaq -1.9% one week later
07/22/04… Nasdaq -0.7% one week later
01/29/03… Nasdaq -4.7% one week later
07/15/02… Nasdaq -8.0% one week later
07/11/02… Nasdaq -0.3% one week later
07/03/02… Nasdaq +0.2% one week later
06/24/02… Nasdaq -5.6% one week later
06/12/02… Nasdaq -2.3% one week later
06/04/02… Nasdaq -6.6% one week later
04/01/02… Nasdaq -5.8% one week later
03/22/01… Nasdaq -8.2% one week later
03/05/01… Nasdaq -12.3% one week later
03/01/01… Nasdaq -1.5% one week later
02/14/01… Nasdaq -11.9% one week later