Market Internals Massively Lopsided on the NYSE, Not So Much on the NASDAQ

Stock indexes gapped lower at the open Tuesday and never looked back. Institutional selling pressure hit the tape early in the session and never let up, leading to the most lopsided trading day of 2009. TICKscore settled at -89, Cumulative TICK -142,000. Breadth settled 13:1 negative with 95% down volume. Interesting to note there have been a total of 23 separate occurrences of a 10:1+ negative breadth session on the NYSE since 1980. Of those, 16 led to a higher S&P close within the next two days. That 70% win rate is barely above the 65% at-any-time odds for a higher S&P close within the next two days, indicating an extremely lopsided negative breadth session like we saw Tuesday is not a particularly good indication of a short-term bottom.

That?s not to say we didn?t see some positive signs emerge from Tuesday?s selloff. The OEX outperformed the SPX by nearly 0.3%, almost triggering the short-term buy setup outlined January 22nd. Additionally, the Nasdaq100 (NDX) managed to hold above its three-week ago close at 1184 while the S&P is down over 5% in the same time frame. That relative outperformance by the Nasdaq triggers a short-term S&P buy. The last thirty separate instances in which the S&P was down over 1% compared to its three-week ago close and the NDX was higher are listed in the table below. Note that in 26 out of 30 cases, or 87% of the time, the S&P closed at a subsequently higher level within the next two sessions (usually the next day). That 87% win rate is significantly above the 66% ?at-any-time? odds of a higher S&P close within the next two days?

SPX -1% vs. Three Weeks Ago, NDX Higher
02/17/09? ???
02/03/09? Higher S&P close two sessions later
01/21/09? No higher S&P close within two days
01/15/09? Higher S&P close one session later
08/26/08? Higher S&P close one session later
06/13/08? Higher S&P close one session later
06/04/08? Higher S&P close one session later
05/27/08? Higher S&P close one session later
11/01/07? Higher S&P close one session later
10/30/07? Higher S&P close one session later
10/19/07? Higher S&P close one session later
07/26/07? No higher S&P close within two days
07/10/07? Higher S&P close one session later
06/20/07? Higher S&P close one session later
04/17/06? Higher S&P close one session later
04/12/06? Higher S&P close one session later
10/19/05? No higher S&P close within two days
10/27/04? Higher S&P close one session later
09/28/04? Higher S&P close one session later
05/21/04? Higher S&P close one session later
03/29/04? Higher S&P close one session later
07/24/03? Higher S&P close one session later
07/10/03? Higher S&P close one session later
07/03/03? Higher S&P close one session later
03/14/03? Higher S&P close one session later
03/04/03? Higher S&P close one session later
02/24/03? Higher S&P close one session later
02/19/03? Higher S&P close two sessions later
11/13/02? Higher S&P close one session later
10/11/02? Higher S&P close one session later
07/17/02? No higher S&P close within two days

Note that despite the massively lopsided 5:1 negative breadth, downside volume accounted for slightly less than 80% of total volume on the NASDAQ exchange. That’s a subtle clue that selling pressure, at least among tech stocks, wasn’t particularly intense. The last thirty times that NASDAQ breadth closed 3:1 negative and down volume was less than 80% are noted in the table below…

Nasdaq Breadth 3:1 Negative, Less than 80% Down Volume
02/17/09… ???
10/27/08… Higher NDX close three sessions later
04/22/08… Higher NDX close three sessions later
03/17/08… Higher NDX close three sessions later
10/12/05… Higher NDX close three sessions later
02/09/05… Higher NDX close three sessions later
07/08/04… No higher close 3-5 trading days later
02/04/04… Higher NDX close three sessions later
10/22/03… Higher NDX close four sessions later
07/17/03… Higher NDX close three sessions later
09/23/02… Higher NDX close three sessions later
07/23/02… Higher NDX close three sessions later
12/20/00… Higher NDX close three sessions later
11/20/00… Higher NDX close three sessions later
05/10/00… Higher NDX close three sessions later
04/12/00… Higher NDX close four sessions later
04/04/00… Higher NDX close three sessions later
10/08/98… Higher NDX close three sessions later
10/07/98… Higher NDX close three sessions later
10/05/98… Higher NDX close five sessions later
08/26/98… No higher close 3-5 trading days later
12/18/95… Higher NDX close three sessions later
04/08/92… Higher NDX close three sessions later
11/19/91… Higher NDX close three sessions later
11/15/91… Higher NDX close three sessions later
01/14/91… Higher NDX close three sessions later
09/24/90… Higher NDX close five sessions later
08/23/90… Higher NDX close three sessions later
08/21/90… Higher NDX close four sessions later
08/17/90… No higher close 3-5 trading days later
08/03/90… No higher close 3-5 trading days later

Note that in 26 out of 30 occurrences, or 87% of the time, the NDX posted a higher close 3-5 trading days later. That’s well above the 68% at-any-time odds for a higher NDX close 3-5 sessions later. Historically, a 3:1+ negative breadth session on the NASDAQ coincides with at least 80% downside volume in over 4 out of 5 occurrences. When this hasn’t been the case, there’s a notable tendency for the NDX to bottom out over the short-term.

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

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