Volume Declines Despite 3:1 Negative Breadth on the NYSE

TICKscore closed at -20 Friday, Cumulative TICK -38,000. Breadth settled
nearly 4:1 negative. Volatility surged, with the VXO gaining 16% to close at
70.31. Volume was down, not surprising given the heavy volume on Thursday. The
drop in volume and lopsided negative breadth triggers a 1-3 day buy setup,
although the accuracy of this setup has been faltering recently. On two
separate occasions in the last two months this pattern failed to lead to a
higher S&P close within the next three sessions. The overall accuracy remains
high at 27 out of 30, or 90%, compared with 72% at-any-time odds, but any
further misses and it will no longer maintain a statistically significant
edge...

NYSE Decliners 3:1 over Advancers, NYSE Volume Down
11/14/08... ???
11/05/08... No higher close within five sessions (*)
10/24/08... Higher SPX close two sessions later
10/15/08... Higher SPX close one session later
10/09/08... Higher SPX close two sessions later
10/07/08... Higher SPX close four sessions later (*)
09/22/08... Higher SPX close three sessions later
09/17/08... Higher SPX close one session later
09/09/08... Higher SPX close one session later
08/25/08... Higher SPX close one session later
07/24/08... Higher SPX close one session later
04/11/08... Higher SPX close two sessions later
03/10/08... Higher SPX close one session later
03/06/08... Higher SPX close three sessions later
02/14/08... Higher SPX close one session later
12/14/07... Higher SPX close five sessions later (*)
11/19/07... Higher SPX close one session later
11/15/07... Higher SPX close one session later
11/05/07... Higher SPX close one session later
05/10/07... Higher SPX close one session later
03/02/07... Higher SPX close two sessions later
01/05/07... Higher SPX close one session later
04/07/06... Higher SPX close one session later
08/05/05... Higher SPX close two sessions later
07/17/03... Higher SPX close one session later
06/23/03... Higher SPX close one session later
03/24/03... Higher SPX close one session later
03/10/03... Higher SPX close three sessions later
01/27/03... Higher SPX close one session later
10/09/02... Higher SPX close one session later
10/07/02... Higher SPX close one session later

Noteworthy that the Nasdaq100 posted an 'inside day' Friday, meaning the
intraday high was less than the previous day's high and the low was greater
than the previous day's low. Normally you'll see a break of the previous day's
low on a 2:1+ negative breadth session. Since 1990, there have only been
thirteen instances in which the NDX posted an inside day on a 2:1 negative
breadth session. Note the tendency for the Nasdaq to trade higher over the
next few sessions. The sample size is too small to be considered significant,
but this does suggest we should be on the lookout for signs of waning downside
momentum.

Nasdaq Breadth 2:1 Negative & Inside Day
11/14/08... NDX ???
10/27/08... NDX +14.0% three sessions later
07/14/08... NDX +3.1% three sessions later
11/19/07... NDX +0.4% three sessions later
07/27/07... NDX -0.6% three sessions later
06/22/07... NDX +0.6% three sessions later
03/02/07... NDX +0.6% three sessions later
01/05/07... NDX +1.7% three sessions later
08/11/06... NDX +5.5% three sessions later
10/18/05... NDX +1.8% three sessions later
02/24/03... NDX +0.1% three sessions later
01/30/03... NDX -1.4% three sessions later
10/09/02... NDX +11.2% three sessions later
09/20/01... NDX +2.0% three sessions later

From a longer-term perspective, there are few encouraging signs. As I
mentioned on Thursday, the cumulative TICKscore fell into new lows for the
year, reflecting the persistent institutional selling that began over a year
ago. Along similar lines, I'd note that the 200-day moving average of
Advancing Volume minus Declining Volume is on the verge of falling into new
lows for the year. In bullish times this indicator will hold above the zero
level, as was the case throughout the 90's as well as the 2003-2007 period.
This was one of the five 'big picture' indicators that I highlighted back in
mid-October because of its bearish posture prior to the carnage of the last
three months. It's noteworthy that a little over a month later, as the market
has chopped violently, there's been no improvement in any of the five
indicators.

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

 Print This Post