July 22, 1999 – Special Report
Today, the Dow Jones Industrial Average was down 33.56 points to 10,969.22 (-0.31%), the Nasdaq Composite was down 77.33 points to 2684.44(-2.80%).
The Dow came with a few dozen points of its 50 day moving average. The Nasdaq is still about 100 points away from its 50 day MA.
Tuesday's SM Special Report mentioned the rare occurrence of the NASDAQ's Closing Arms Index closing at a high value of 1.53. I went onto explain the generally long-term positive implications of such an occurrence.
Today the Nasdaq Arms Index closed at 1.80. Since 1980, such a closing reading (or higher) has occurred on 1.7% of trading days….truly a rare occurrence. Of those times, only 2 occurrences saw negative 125 and 250 day forward looking performance – September 21, 1987 and September 27, 1983. Actually on October 12, 1987, there was a closing reading of 1.43.
The average 250 and 125 day gains in the Nasdaq after a reading of 1.80 or greater is 25.75% and 15.24%, respectively. This compares to an overall Nasdaq gain of 16.16% and 7.88%, respectively.
Once again, on a very short-term basis, when the arms index closes above 1.50, usually there is some sort of bounce just around the corner. The NYSE arms index closed at 1.09 (not significant), the Nasdaq 100 arms index closed at 2.12 and again the Nasdaq arms index closed at 1.80 today. If history is any guide, they are pointing to some sort of bounce in the very near future.
Having said all of that, I don't think that this correction is finished…we just did not see that culminating capitulation accompanied by heavy volume…that would convince me that the worst is over….
Does it make sense?????
I hope so.
Have a good night or day….
Paulo
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