Selective Selling Pressure: Higher High & Low for NASDAQ Despite 3:1 Negative Breadth

TICKscore closed at -20 Friday, Cumulative TICK -32,000. Breadth settled 3:1 negative on both exchanges, but it’s noteworthy that the NDX still posted a higher high and higher low, suggesting sellers had a tough time driving tech stocks lower. Since 1990, there have been 158 sessions in which Nasdaq breadth closed 3:1 negative. In only one case prior to Friday (6/15/98) did the lopsided negative breadth session coincide with a higher high and higher low.

Shares of General Electric closed lower for the seventh day in a row Friday, a sign the stock is short-term oversold. While it’s not quite the bellwether it once was, GE still sports the third-highest market cap of all S&P500 stocks behind MSFT and XOM. Historically, this many consecutive down days has usually brought out some institutional buying pressure that gives shares a short-term lift. Since 1990 there have been sixteen instances in which GE posted seven straight lower closes, all of which are outlined in the table below. Note that in every case the stock  posted a higher close within two sessions…

GE Down Seven Consecutive Days
10/25/09… GE ???
11/09/07… GE +2.2% two sessions later
01/25/06… GE +0.8% one session later
06/16/05… GE +1.1% one session later
07/16/03… GE +1.5% two sessions later
02/12/03… GE +1.0% two sessions later
09/03/02… GE +0.8% one session later
06/04/02… GE +0.3% one session later
04/29/02… GE +2.3% one session later
09/20/01… GE +3.1% one session later
01/05/00… GE +1.3% one session later
04/28/98… GE +1.5% one session later
08/05/97… GE +2.3% one session later
09/09/93… GE +0.8% one session later
01/31/92… GE +1.0% one session later
09/18/91… GE +0.2% one session later
09/20/90… GE +1.4% one session later

Despite heavily lopsided negative breadth, downside volume accounted for only 71% of total volume on the NASDAQ exchange (see datasheet). 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 at least 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
10/23/09… ???
08/14/09… Higher NDX close four sessions later
06/15/09… Higher NDX close four sessions later
04/20/09… Higher NDX close three  sessions later
02/17/09… No higher close 3-5 trading days later
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

In 27 out of the last 30 occurrences, or 90% of the time, the NDX posted a higher close 3-5 trading days later, significantly 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.

From an intermediate-term perspective, it’s encouraging to see the Market Vane Bullish Consensus hold above 50% for a fifth consecutive week and close at a new 52-week high. As noted in this column from a month ago, new 52-week highs for this survey tend to have bullish implications for the intermediate-term. In 23 out of the last 30 occurrences since 1997, the S&P was higher two weeks after Market Vane registered a new 52-week high. Also interesting to note this past week was only the tenth time in the history of the survey that a new 52-week high coincided with a down week for the S&P. In 8 out of the past 9 occurrences the S&P posted a higher weekly close within two weeks.

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

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