Another 90% Down Volume Day on the NASDAQ, Tilting Odds in Favor of Short-term Bounce

TICKscore closed at -18 Thursday, Cumulative TICK -76,000. Institutions were
better sellers, although the intensity of the selling was down from recent
sessions given relatively light participation. Just over 650 issues hit new
52-week lows on the NYSE, far below the 1,000+ reading we saw on Monday (when
the S&P closed at almost the same level). This suggests the majority of stocks
are not following the major averages into new lows, a positive divergence for
the short-term.

Breadth settled better than 4:1 negative on both the NYSE and NASDAQ, with
downside volume accounting for 88% of total volume on the big board and 95% of
total volume on the NASDAQ. That latter figure indicates selling pressure is
most likely at or very near a short-term exhaustion point, suggesting we'll
see a bounce within the next couple of sessions. Since the late 90's, we've
seen 27 sessions in which NASDAQ declining volume accounted for 90% or more of
total NASDAQ volume. Each of these instances is noted in the table below,
along with the performance of the S&P over the next 1-3 sessions. Note that
the climactic selling on the NASDAQ normally translated into a short-term
bounce for the S&P within the next 1-3 sessions. In only one case out of 27
occurrences was this not the case. That 96% win rate is significantly above
the 72% at-any-time odds for a higher S&P close within the next three days...

90% Down Volume on the NASDAQ Exchange
10/02/08... ???
09/29/08... Higher S&P500 close one session later
09/15/08... Higher S&P500 close one session later
09/09/08... Higher S&P500 close one session later
09/04/08... Higher S&P500 close one session later
02/05/08... Higher S&P500 close two sessions later
01/04/08... Higher S&P500 close one session later
10/19/07... Higher S&P500 close one session later
02/27/07... Higher S&P500 close one session later
11/27/06... Higher S&P500 close one session later
06/12/06... Higher S&P500 close three sessions later
07/06/04... Higher S&P500 close one session later
03/15/04... Higher S&P500 close one session later
07/17/03... Higher S&P500 close one session later
03/24/03... Higher S&P500 close one session later
02/07/03... Higher S&P500 close one session later
12/09/02... Higher S&P500 close one session later
09/19/02... Higher S&P500 close one session later
09/03/02... Higher S&P500 close one session later
07/01/02... Higher S&P500 close three sessions later
06/03/02... Higher S&P500 close one session later
06/14/01... Higher S&P500 close four sessions later
04/03/01... Higher S&P500 close two sessions later
03/28/01... Higher S&P500 close two sessions later
03/12/01... Higher S&P500 close one session later
04/14/00... Higher S&P500 close one session later
08/31/98... Higher S&P500 close one session later
10/27/97... Higher S&P500 close one session later

NYSE volume barely increased from Wednesday's levels, coming in at 1.44
billion. That's below the 20-day moving average, which is noteworthy
considering that the S&P fell 4% Thursday. Historically, a solid down day for
the S&P (over 1.5% with 2:1 negative breadth) translates into above-average
volume. When this hasn't been the case, the market has a tendency to bottom
out over the short-term and ultimately close higher four trading days later.
The last thirty instances in which NYSE volume remained below its 20-day
average on a 1.5%+ down day for the S&P (with at least 2:1 negative breadth)
are listed in the table below...

S&P500 -1.5%, Breadth 2:1 Neg, Volume Below 20-day Avg
10/02/08... S&P500 ??? four sessions later
09/22/08... S&P500 +0.5% four sessions later
08/25/08... S&P500 +1.3% four sessions later
08/18/08... S&P500 +1.1% four sessions later
08/07/08... S&P500 +1.6% four sessions later
07/28/08... S&P500 +2.1% four sessions later
05/07/08... S&P500 +0.8% four sessions later
04/11/08... S&P500 +2.5% four sessions later
02/05/08... S&P500 +0.2% four sessions later
12/17/07... S&P500 +2.7% four sessions later
11/26/07... S&P500 +5.3% four sessions later
11/21/07... S&P500 +3.7% four sessions later
09/07/07... S&P500 +2.1% four sessions later
08/28/07... S&P500 +4.0% four sessions later
08/14/07... S&P500 +1.3% four sessions later
06/05/06... S&P500 -1.0% four sessions later
05/30/06... S&P500 +0.4% four sessions later
08/05/04... S&P500 -0.5% four sessions later
08/05/03... S&P500 +1.6% four sessions later
05/19/03... S&P500 +1.4% four sessions later
03/24/03... S&P500 -0.1% four sessions later
03/10/03... S&P500 +3.2% four sessions later
02/24/03... S&P500 +1.0% four sessions later
12/27/02... S&P500 +3.8% four sessions later
12/09/02... S&P500 -0.3% four sessions later
11/11/02... S&P500 +3.8% four sessions later
10/16/02... S&P500 +3.5% four sessions later
09/12/02... S&P500 -2.0% four sessions later
08/28/02... S&P500 -2.7% four sessions later
08/23/02... S&P500 -2.5% four sessions later
08/13/02... S&P500 +7.5% four sessions later

Note that in 23 out of 30 cases, or 77% of the time, the S&P was trading at a
higher level four sessions later, significantly better than the 54% at-any-
time odds.

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

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