IDENTIFYING THE NASDAQ NEAR TERM BOTTOM!
First thing I did as I was analyzing the Nasdaq data, was compile an ongoing list of each new closing lows in the Nasdaq. I compared the market internals each time the Nasdaq closed at a new low. Here is the list:
Nasdaq Closing Lows since January 2000
April 14th - new low of year 2000 closing at 3321
May 23rd - breached April 14th low closing at 3164 (Positive Divergences Spur Rally)
Oct. 12th - breached May 24th low closing at 3074
Nov. 10th - breached Oct. 12th low closing at 3028
Nov. 13th - breached Nov. 10th low closing at 2966
Nov. 20th - breached Nov. 13th low closing at 2875
Nov. 21th - breached Nov. 20th low closing at 2871
Nov. 22nd - breached Nov. 21st low closing at 2755
Nov. 28th - breached Nov. 22nd low closing at 2734
Nov. 29th - breached Nov. 28th low closing at 2706
Nov. 30th - breached Nov. 29th low closing at 2597
Dec. 19th - breached Nov. 30th low closing at 2511
Dec. 20th - breached Dec. 19th low closing at 2332
Calendar Year 2001
Jan. 2nd - breached Dec. 20th low closing at 2291 (Positive Divergences Spur Rally)
Feb. 21st - breached Jan. 2nd low closing at 2268
Feb. 22nd - breached Feb. 21st low closing at 2244
Feb. 27th - breached Feb 22nd low closing at 2207
Feb. 28th- breached Feb 27th low closing at 2151
March 2nd - breached Feb. 28th low closing at 2117
March 9th - breahed March 2nd low closing at 2052
March 12th - breahed March 9nd low closing at 1923
March 16th - breached March 12th low closing at 1890
March 20th - breached March 12th low closing at 1857
March 21st - breached March 20th low closing at 1830
March 29th - breached March 21st low closing at 1820.
Ok, I am now going to go through all of the market internals which demonstrate positive divergences between the Nasdaq close today (March 29th) versus the prior Nasdaq closing low which occurred on March 21st. Let's crunch the numbers:
1. Price
On March 21, 2001, the Nasdaq (or OTC - Over the Counter) closes at a new low for the year of 1830. Today, March 29, 2001, the Nasdaq closed at 1820. A new closing low in the Nasdaq gets us past the first hurdle.
2. Volume
On March 21, 2001, there were approximately 2.093 million shares traded on the Nasdaq . Today, the volume on the Nasdaq was approximately 2.060 million shares. Therefore, we have a new closing low in the Nasdaq on lower volume. The second hurdle is complete, although I would have preferred to see much less volume to indicate that the selling volume pressure was drying up considerably.
3. Advancing Issues
On March 21, 2001, there were 1240 Advancing Issues. For those of you new to technical analysis, "advancing issues" are simply stocks that rose in price on that day. Today, there were 1,469 Advancing Issues. That is a promising sign as it demonstrates that even with a lower close in the Nasdaq, more stocks were advancing today when compared to the prior low. Bullish Indicator!
4. Declining Issues
On March 21, 2001, there were 2,484 Declining Issues. Today, there were only 2,141 Declining Issues. Less decliners is also a Bullish Indicator!
5. New Highs
On March 21, 2001, there were 17 new highs. Today, there were 32 new highs - a 47% increase when compared to the prior low. Bullish Indicator!
6. New Lows
On March 21, 2001, there were 376 new lows. Today, there were only 255 new lows. Less lows is good. And that is a dramatic decrease in the number of new lows. Bullish Indicator!
7. Put/Call Ratio
On March 21, 2001, the CBOE put/call ratio was .86. Today, the ratio was .91. Although I don't put too much weight in this, it is more bullish today than it was on March 21st since the ratio was higher. Bullish Indicator!
**Unfortunately, the next two indicators weren't so promising.**
8. Advancing Volume (Red Flag!)
On March 21, 2001, the advancing volume in the Nasdaq was 960,994. Today, the advancing volume was only 459,766. I was hoping that there would be more advancing volume today versus March 21st, but there wasn't. In fact, it was a substantial amount less. If you look at my analysis of market internals in my January 2nd Special Alert, the advancing volume was much higher on the new closing low and, therefore, suggested a positive divergence and another bullish indicator. Now I have no idea how much this particular category impacts the rest of the positive divergences, but I don't think we should ignore something simply because it doesn't support what we want to see. Therefore, we must assign this particular market internal as a Bearish Indicator!
9. Declining Volume (Red Flag!)
On March 21, 2001, there were 1,064,574 declining shares. I was hoping there would be more less declining shares indicating less selling pressure today, but there wasn't. Today, there were 1,560,548 declining shares. Another Bearish Indicator!
Conclusion. I have been analyzing these market internals every day for about a year now. There have been only two times that I recall seeing as many positive divergences in the market internals as I did today - January 2nd and May 23rd - both of which sparked rallies in the Nasdaq. Will today's market internal data signify another rally in the Nasdaq? Who knows. The fact that categories #8 and #9 were bearish indicators, could nullify the analysis and gives me concern. On the other hand, perhaps given the positive divergences in the other categories, it won't matter. If the Nasdaq closes below 1820 tomorrow, or in the very near future, than the next time I do a Special Alert on market internals analysis, I will wait until I see positive divergences in EVERY category! |
