Persistence

TICKscore busted the pattern of lower highs mentioned last night, closing at a strong +39 as institutional buyers came out in force during the afternoon session. Volume was the heaviest in over two weeks on both the NYSE and NASDAQ. NASDAQ volume nearly hit 3 billion shares, keeping the NASDAQ/NYSE Volume Ratio high at 1.58 as speculative participants continue to dominate trade. Note that the 20-day moving average is on the verge of crossing the 1.50 level, a bearish sign from a longer-term perspective (see Sunday’s column)

VXO closed under its lower bollinger band once again Wednesday, creating a new sell point for the intraday trade discussed Tuesday evening – OEX 419.49. A break of that level during Thursday or Friday’s session would trigger an intraday sell and tilt the odds in favor of a close below that level.

Given the persistence of the recent uptrend, there’s reason to doubt whether today’s OEX low will be taken out before the end of the week. Note from this chart of the Nasdaq100 that the NDX 5-day RSI closed in technically overbought territory (above 75) for a fifth consecutive session Wednesday. Such persistence is usually a telling indication for the short-term, because the market is refusing to buckle despite overbought conditions. Historically, that’s a sign of strength for the short-term, because the market isn’t going down when it “should”. This type of action typically translates into even higher prices over the short-term. The table below lists each of the last thirty separate occurrences in which the NDX 5-day RSI closed above 75 five days in a row. Note that this just occurred for the first time this year…

NDX 5-day RSI >75 Five Consecutive Sessions
05/06/09…???
08/15/08…No higher close in 1-3 days
09/28/07…Higher NDX close one day later
07/18/07…Higher NDX close one day later
04/26/07…Higher NDX close one day later
11/17/06…Higher NDX close one day later
09/18/06…Higher NDX close two days later
11/23/05…Higher NDX close one day later
11/09/05…Higher NDX close one day later
07/15/05…Higher NDX close two days later
05/20/05…Higher NDX close one day later
11/08/04…Higher NDX close three days later
06/01/04…No higher close in 1-3 days
01/09/04…Higher NDX close one day later
09/02/03…Higher NDX close two days later
03/20/03…Higher NDX close one day later
11/16/01…Higher NDX close one day later
08/29/00…Higher NDX close one day later
12/22/99…Higher NDX close one day later
11/04/99…Higher NDX close one day later
01/08/99…Higher NDX close one day later
11/23/98…Higher NDX close two days later
11/10/98…Higher NDX close one day later
07/14/98…Higher NDX close one day later
02/03/98…Higher NDX close one day later
07/14/97…Higher NDX close one day later
11/11/96…Higher NDX close three days later
09/19/96…Higher NDX close one day later
04/24/96…Higher NDX close one day later
02/06/96…Higher NDX close two days later
06/21/95…Higher NDX close one day later

In 28 out of the past 30 occurrences, or 93% of the time, the Nasdaq100 proceeded to post a higher close (above the setup day’s close) within the next 1-3 sessions. That’s significantly greater than the 72% at-any-time odds for a higher NDX close 1-3 days later.

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

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