TICKscore Closes at Near-Record Low on Massive Institutional Selling

Stocks were crushed Thursday under a barrage of institutional distribution. Selling pressure was already real and massive before any erroneous trades may have taken place Thursday. TICKscore was at an extreme -81 just before 2:30pm ET given the unbelievably weak NYSE TICK. It closed at -127, one of the lowest readings ever recorded as the relentless institutional selling persisted throughout the session. That’s the real news, not whether some erroneous trades took place between 2:30-3:00.

One short-term positive sign to emerge from Thursday’s chaos was a subtle outperformance by the Nasdaq100 (NDX) relative to the Nasdaq Composite.  On Wednesday, the NDX only fell 0.5% while the Composite fell 0.9%. Today both indices fell over 3%, but the NDX once again managed to outperform slightly on a percentage basis. When the NDX closes down 0.5%+ two consecutive sessions and outperforms the Composite on both sessions, it’s been a bullish sign for the short-term. The last 30 occurrences are listed below…

NDX -0.5%, Outperforms Nasdaq Composite Two Consecutive Days
05/06/10… ???
09/24/09… Higher NDX close two sessions later
08/06/09… Higher NDX close one session later
06/16/09… Higher NDX close one session later
03/30/09… Higher NDX close one session later
03/02/09… Higher NDX close one session later
01/30/09… Higher NDX close one session later
01/12/09… Higher NDX close one session later
11/20/08… Higher NDX close one session later
11/12/08… Higher NDX close one session later
11/11/08… Higher NDX close two sessions later
10/27/08… Higher NDX close one session later
10/07/08… Higher NDX close one session later
10/06/08… No higher NDX close next 1-2 days
08/19/08… Higher NDX close one session later
06/24/08… Higher NDX close one session later
06/18/08… Higher NDX close one session later
03/17/08… Higher NDX close one session later
06/07/07… Higher NDX close one session later
09/22/06… Higher NDX close one session later
06/19/06… Higher NDX close two sessions later
10/05/05… No higher NDX close next 1-2 days
01/05/05… Higher NDX close two sessions later
05/10/04… Higher NDX close one session later
05/07/04… Higher NDX close two sessions later
04/29/04… No higher NDX close next 1-2 days
09/26/03… Higher NDX close one session later
10/07/02… Higher NDX close one session later
09/20/01… Higher NDX close two sessions later
11/30/00… Higher NDX close one session later
09/18/00… Higher NDX close one session later

Note that in 27 out of the last 30 occurrences, or 90% of the time, the NDX closed at a subsequently higher level 1-2 days later, significantly above the 65% random chance for an NDX close above today’s settlement within the next two days.

Declining issues on the NYSE outnumbered advancers by a 17:1 margin Thursday, one of the most lopsided sessions ever recorded. Since the removal of the uptick rule in 2007, we’ve seen a dozen sessions in which decliners outnumbered advancers by more than a 10:1 margin (which is twice the number seen throughout the entire 1990-2007 period, illustrating the uptick rule’s impact on breadth). Note that in 11 out of 12 cases there was a subsequently lower S&P close 2-4 sessions later, suggesting a bounce on Friday could leave the market in a vulnerable position to start the next week…

10:1 Negative Breadth Days Post-July 2007
05/06/10… ???
02/04/10… Lower S&P close two sessions later
03/05/09… Lower S&P close two sessions later
03/02/09… Lower S&P close three sessions later
02/17/09… Lower S&P close two sessions later
11/19/08… Lower S&P close two sessions later
11/12/08… Lower S&P close three sessions later
10/09/08… Lower S&P close four session later
10/06/08… Lower S&P close two sessions later
09/29/08… Lower S&P close four sessions later
09/17/08… No lower close 2-4 sessions later
09/15/08… Lower S&P close two sessions later
11/07/07… Lower S&P close two sessions later

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

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