Short-term Setups in Play, Keeping an Eye on the Cumulative TICK 20-day Moving Average

The Nasdaq100 posted a higher high and higher low Friday despite declining issues outnumbering advancers by over a 3:2 margin on the NASDAQ exchange. 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 mixed, it still maintains a 73% 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
05/15/09? NDX ??? two sessions later
04/27/09? NDX +0.9% 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

The Nasdaq outperformance also triggered a separate short-term buy given that the NDX closed down only 0.3% vs. a 1.1% drop for the S&P500. This type of rotational trading usually spells higher prices for the S&P looking out three trading days. 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%
05/15/09? S&P500 ??? three days later
05/11/09? S&P500 -1.8% three days later
04/27/09? S&P500 +1.8% 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

Looking out beyond the next few days, it’s hard not to notice that the 20-day average of the Cumulative TICK topped out over a week ago and has been trending steadily lower since that time. With a long string of positive readings set to fall off the average over the next few weeks, it looks like the 20-day average will have a tough time taking out that early May top. Cumulative TICK could average +50,000 over the next ten sessions, which would mean even more positive NYSE TICK action than we’ve seen over most of the past month, and the 20-day moving average would still be trading below its May 6th top.

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

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