Nasdaq100 Nearly Makes It Five in a Row

Stock indices settled lower Monday in light trading. Institutional participation was noticeably absent, with TICKscore settling at zero and Cumulative TICK closing at a similarly neutral -8,000. Volume hit its lowest level in over two weeks, with only 1.4 billion shares trading hands on the NYSE. The S&P posted an NR10 day, meaning it was the narrowest range day in ten sessions. You would tend to think that when breadth closes 2:1 negative and the SPX posts its narrowest range in over two weeks, it would have short-term bullish implications. But it’s much more of a mixed bag. We have to go all the way back to the 1970′s to find the last thirty occurrences in which breadth closed 2:1 negative and the S&P500 posted an NR10 day. Over the next 1-2 days, the track record is virtually identical (20-10) whether looking for a higher close within the next two sessions or a lower close within the next sessions. This provides no edge for the short-term, but it’s interesting that it’s not as bullish as one might expect.

That said, we did see some traditionally bullish signals triggered at Monday’s close looking out 2-3 sessions, suggesting further weakness short-term will most likely prove to be a buying opportunity looking out towards the end of the week. The strongest sign Monday was the persistent bid seen in the NDX. Even during the S&P’s afternoon slide to new lows, the NDX held its morning low and managed to finish nearly unchanged on the session. When the NDX manages to hold its own in the face of a solid down day for the S&P, it’s a sign of limited selling pressure and/or a rotational environment. The S&P is usually trading higher three sessions later. Listed below are each of the last thirty instances in which the NDX settled down less than 0.5% (or managed a gain) on a day when the S&P fell 1%+. Note that in 25 out of 30 cases, or 83% of the time, the S&P closed at a higher level three sessions later, significantly greater than the 55% at-any-time odds for a higher S&P three sessions later…

S&P500 Drops 1%+, Nasdaq Down Less than 0.5%
04/27/09? S&P500 ??? three days later
03/19/09? S&P500 +2.8% three days later
02/20/09? S&P500 -0.7% three days later
10/29/08? S&P500 +3.9% three days later
10/10/08? S&P500 +1.0% three days later
10/08/08? S&P500 +1.9% three days later
08/12/08? S&P500 +0.7% three days later
07/31/08? S&P500 +1.4% three days later
07/15/08? S&P500 +3.8% three days later
05/23/08? S&P500 +1.6% three days later
06/13/06? S&P500 +2.3% three days later
05/12/05? S&P500 +1.2% three days later
03/09/05? S&P500 -0.0% three days later
04/16/03? S&P500 +3.6% three days later
01/22/03? S&P500 -3.5% three days later (*)
10/09/02? S&P500 +8.3% three days later
09/24/02? S&P500 +1.0% three days later
04/29/02? S&P500 +1.8% three days later
03/06/00? S&P500 +0.8% three days later
02/16/00? S&P500 -2.6% three days later (*)
05/27/99? S&P500 +1.1% three days later
01/14/99? S&P500 +3.7% three days later
07/09/97? S&P500 +1.2% three days later
03/13/97? S&P500 +0.0% three days later
04/10/96? S&P500 +1.4% three days later
02/20/96? S&P500 +2.9% three days later
01/10/96? S&P500 +0.2% three days later
06/24/94? S&P500 +1.1% three days later
04/01/91? S&P500 +2.3% three days later
01/09/91? S&P500 +0.3% three days later
01/02/91? S&P500 -3.4% three days later (*)

This is consistent with intermediate-term bullish setups in play that suggest pressure during the first part of this week will be met with another round of buying. With the FOMC announcement on tap for Wednesday, this suggests a positive reaction.

The Nasdaq100 posted a higher high and higher low Monday despite nearly 2:1 negative breadth. That’s generally a bullish sign short-term. The last thirty occurrences in which the NDX posted a higher high and higher low on a 3:2 negative breadth day are listed in the table below. While recent performance has been fairly mixed, it still maintains a 77% win rate in terms of calling for a higher NDX close (above the setup day) two sessions later, significantly better than the Nasdaq?s 52% at-any-time odds of closing higher two sessions later…

NDX Higher High & Higher Low Despite 3:2 Neg Breadth
04/27/09… NDX ??? two sessions later
02/25/09? NDX -3.8% two sessions later
02/04/09? NDX +5.1% two sessions later
01/22/09? NDX +1.4% two sessions later
12/09/08? NDX -2.6% two sessions later
12/04/08? NDX +8.6% two sessions later
10/14/08? NDX -3.8% two sessions later
08/07/08? NDX +3.3% two sessions later
06/17/08? NDX +0.5% two sessions later
03/19/08? NDX +5.8% two sessions later
02/28/08? NDX -3.4% two sessions later
02/21/08? NDX +1.1% two sessions later
10/30/07? NDX -0.5% two sessions later
09/24/07? NDX +1.5% two sessions later
07/16/07? NDX +0.5% two sessions later
05/17/07? NDX +1.4% two sessions later
05/14/07? NDX +0.2% two sessions later
11/09/06? NDX +1.6% two sessions later
10/20/06? NDX +0.3% two sessions later
08/09/06? NDX +0.1% two sessions later
07/27/06? NDX +2.1% two sessions later
04/03/06? NDX +1.5% two sessions later
10/20/05? NDX +2.3% two sessions later
07/21/05? NDX -0.5% two sessions later
05/12/05? NDX +1.8% two sessions later
04/08/05? NDX +0.2% two sessions later
01/13/05? NDX +1.8% two sessions later
10/19/04? NDX +2.2% two sessions later
10/13/04? NDX -0.2% two sessions later
10/07/04? NDX -1.2% two sessions later
09/08/04? NDX +2.6% two sessions later

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

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