A Quick ‘Big Picture’ Review
By
Rennie on Sunday, May 3rd, 2009 at 6:06 pm
TICKscore closed at +19 Friday, sending the longer-term cumulative TICKscore line above its January high. That’s the first time we’ve seen a longer-term shift to ‘higher highs’ in roughly two years, a longer-term positive sign. Some other ‘big picture’ gauges, such as the 200-day moving average of NYSE Up Volume – Down Volume and the Last Hour indicator, remain bearish but are not too far from shifting into bullish territory, something to keep an eye on in the weeks ahead. Others, such as the Market Vane survey of commodity trading advisors, remain in bearish territory. Even with the Cumulative TICKscore moving into new highs for the year, the majority of big picture indicators have yet to confirm. If and when the Up-Down Volume and Last Hour also turn bullish, we could assume a major shift in the market’s longer-term trend. Until then, it’s too soon to jump the gun, particularly given the elevated NASDAQ volume relative to NYSE volume over the past two weeks.
The Nasdaq/NYSE Volume Ratio, which had fallen out of bearish territory in December of 2008, is now headed in the wrong direction and could move back into bearish territory in the next 1-2 weeks. Note that the 20-day moving average of Nasdaq/NYSE Volume Ratio is nearing the 1.50 level. It’s historically been a negative sign for stocks when this average hits 1.50 or higher, as it indicates excessive levels of speculative participation (see long-term chart). In the table below I’ve listed all six separate occurrences since 1990 in which the ND/NY Volume Ratio 20-day average hit 1.50 or higher, along with the performance of the Nasdaq100 by the time the moving average fell back under 1.40 (and the number of days that elapsed). While six cases isn’t a statistically significant sample, the market’s extremely poor performance is nonetheless noteworthy…
20-day Moving Average of Nasdaq/NYSE Volume Ratio Hits 1.50
02/19/09… Nasdaq -8.0% when 20-day Avg <1.40 (10 days)
05/02/08… Nasdaq -38.2% when 20-day Avg <1.40 (152 days)
02/26/08… Nasdaq -5.8% when 20-day Avg <1.40 (14 days)
10/16/07… Nasdaq -9.2% when 20-day Avg <1.40 (59 days)
11/26/99… Nasdaq -46.5% when 20-day Avg <1.40 (413 days)
05/09/96… Nasdaq -4.1% when 20-day Avg <1.40 (44 days)
This setup is not in danger of being triggered this week unless the Volume Ratio continues to trade at sharply elevated levels (like Friday’s 1.66 reading) for the next four sessions. But by the first part of the following week (beginning May 11th), the 20-day moving average will top 1.50 if the ratio just averages 1.50 over the next six sessions.
A Quick ‘Big Picture’ Review
By Rennie on Sunday, May 3rd, 2009 at 6:06 pmTICKscore closed at +19 Friday, sending the longer-term cumulative TICKscore line above its January high. That’s the first time we’ve seen a longer-term shift to ‘higher highs’ in roughly two years, a longer-term positive sign. Some other ‘big picture’ gauges, such as the 200-day moving average of NYSE Up Volume – Down Volume and the Last Hour indicator, remain bearish but are not too far from shifting into bullish territory, something to keep an eye on in the weeks ahead. Others, such as the Market Vane survey of commodity trading advisors, remain in bearish territory. Even with the Cumulative TICKscore moving into new highs for the year, the majority of big picture indicators have yet to confirm. If and when the Up-Down Volume and Last Hour also turn bullish, we could assume a major shift in the market’s longer-term trend. Until then, it’s too soon to jump the gun, particularly given the elevated NASDAQ volume relative to NYSE volume over the past two weeks.
The Nasdaq/NYSE Volume Ratio, which had fallen out of bearish territory in December of 2008, is now headed in the wrong direction and could move back into bearish territory in the next 1-2 weeks. Note that the 20-day moving average of Nasdaq/NYSE Volume Ratio is nearing the 1.50 level. It’s historically been a negative sign for stocks when this average hits 1.50 or higher, as it indicates excessive levels of speculative participation (see long-term chart). In the table below I’ve listed all six separate occurrences since 1990 in which the ND/NY Volume Ratio 20-day average hit 1.50 or higher, along with the performance of the Nasdaq100 by the time the moving average fell back under 1.40 (and the number of days that elapsed). While six cases isn’t a statistically significant sample, the market’s extremely poor performance is nonetheless noteworthy…
20-day Moving Average of Nasdaq/NYSE Volume Ratio Hits 1.50
02/19/09… Nasdaq -8.0% when 20-day Avg <1.40 (10 days)
05/02/08… Nasdaq -38.2% when 20-day Avg <1.40 (152 days)
02/26/08… Nasdaq -5.8% when 20-day Avg <1.40 (14 days)
10/16/07… Nasdaq -9.2% when 20-day Avg <1.40 (59 days)
11/26/99… Nasdaq -46.5% when 20-day Avg <1.40 (413 days)
05/09/96… Nasdaq -4.1% when 20-day Avg <1.40 (44 days)
This setup is not in danger of being triggered this week unless the Volume Ratio continues to trade at sharply elevated levels (like Friday’s 1.66 reading) for the next four sessions. But by the first part of the following week (beginning May 11th), the 20-day moving average will top 1.50 if the ratio just averages 1.50 over the next six sessions.