Nasdaq100 (NDX) 5-day RSI Triggers a Short-term Buy

The 5-day RSI for the Nasdaq100 triggered a short-term buy signal Monday after closing below 25 for a third consecutive session. Historically, that’s been a good sign that selling pressure is at or near a short-term exhaustion point, and the NDX has a good track record of rallying out of such oversold territory. Every occurrence of this pattern since 1995 is listed in the table below. Note that in 32 out of 35 cases, or 91% of the time, the Nasdaq was trading at a higher level when the RSI rebounded back over 25. Only three cases lasted more than three sessions, indicating we should see this signal fulfilled by Thursday at the latest.

Nasdaq 5-day RSI under 25 Three Consecutive Sessions
08/16/10… NDX ??? when RSI back over 25
07/01/10… NDX +3.2% when RSI back over 25 (three sessions)
10/08/08… NDX +7.4% when RSI back over 25 (three sessions)
09/05/08… NDX +0.3% when RSI back over 25 (four sessions)
01/22/08… NDX +1.7% when RSI back over 25 (two sessions)
01/08/08… NDX +2.0% when RSI back over 25 (one session)
11/12/07… NDX +4.2% when RSI back over 25 (one session)
03/01/07… NDX -0.6% when RSI back over 25 (three session)
07/17/06… NDX +0.3% when RSI back over 25 (one session)
05/15/06… NDX -3.3% when RSI back over 25 (seven sessions)
02/07/06… NDX +1.1% when RSI back over 25 (one session)
10/12/05… NDX +0.8% when RSI back over 25 (one session)
06/27/05… NDX +1.0% when RSI back over 25 (one session)
04/18/05… NDX +0.8% when RSI back over 25 (one session)
01/24/05… NDX +0.7% when RSI back over 25 (one session)
01/06/05… NDX +0.5% when RSI back over 25 (one session)
08/09/04… NDX +2.1% when RSI back over 25 (one session)
07/16/04… NDX +2.1% when RSI back over 25 (two sessions)
08/08/03… NDX +1.3% when RSI back over 25 (one session)
05/06/02… NDX +10.5% when RSI back over 25 (two sessions)
04/26/02… NDX +2.1% when RSI back over 25 (two sessions)
02/07/02… NDX +2.7% when RSI back over 25 (one session)
09/07/01… NDX -12.2% when RSI back over 25 (seven sessions)
06/18/01… NDX +3.3% when RSI back over 25 (two sessions)
02/22/01… NDX +1.2% when RSI back over 25 (one session)
02/09/01… NDX +2.1% when RSI back over 25 (three sessions)
12/21/00… NDX +9.5% when RSI back over 25 (one session)
10/12/00… NDX +9.1% when RSI back over 25 (one session)
04/14/00… NDX +10.0% when RSI back over 25 (one session)
10/07/98… NDX +4.2% when RSI back over 25 (two sessions)
08/31/98… NDX +6.6% when RSI back over 25 (one session)
12/15/97… NDX +1.3% when RSI back over 25 (one session)
07/15/96… NDX +4.0% when RSI back over 25 (two sessions)
06/20/96… NDX +1.2% when RSI back over 25 (one session)
12/18/95… NDX +4.9% when RSI back over 25 (one session)
11/22/95… NDX +1.6% when RSI back over 25 (one session)

Earlier today I noted the short-term bullish implications of three consecutive lower SPY closes on successively lighter volume. In an effort to increase the small sample size from that study, I ran a similar scan but for merely three lower highs on decreasing volume rather than three lower closes. This resulted in 17 occurrences since inception, 15 of which led to a higher SPY three days later…

SPY Three Lower Highs on Successively Lighter Volume
08/16/10… SPY ??? three sessions later
04/07/09… SPY +5.1% three sessions later
12/23/08… SPY +0.9% three sessions later
08/04/08… SPY +1.6% three sessions later
07/28/08… SPY +2.6% three sessions later
09/24/07… SPY +0.9% three sessions later
03/21/05… SPY -0.8% three sessions later
08/13/04… SPY +2.7% three sessions later
11/11/02… SPY +2.8% three sessions later
12/24/01… SPY +1.1% three sessions later
06/26/01… SPY +0.9% three sessions later
11/20/00… SPY +0.1% three sessions later
07/31/00… SPY +1.8% three sessions later
12/26/97… SPY +3.5% three sessions later
04/03/97… SPY +2.4% three sessions later
06/18/96… SPY +0.7% three sessions later
08/24/95… SPY +0.5% three sessions later
07/19/93… SPY -0.5% three sessions later

The sample size is still a bit small, but the high level of accuracy and the 1.8% average gain is compelling, especially in light of the oversold NDX.

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

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