Monday, November 12, 2007

NASDAQ 100 Update: Down Again...

This particular blog thread is getting dull (in fact, I will only bother to post it here), but to play it out -- here we go.

Downward momentum seems to be slowing, if not diverging on an hourly basis; short-term daily RSI is bottomed out; daily pivot S2 seems to be holding; Adjusted Tick is positive (see Steenbarger); the index is nearing in on a 62% Fibonnaci retracement; and the Financials and Transports are starting to pull on a relative basis (come on Semis). I know -- all technical observations that may amount to a hill of beans in this fearful, split market environment!

As of the time of this mid-day post, the NASDAQ 100 is down more than 10% from recent highs, including four successive down days cumulatively exceeding -9.75%. Again, going back through 1998 (2,480 market days) looking to see what happens the next day when:

(a) The index is down four days in a row; and,
(b) The sum total is less than (more negative than) -9.75%.

We find that of the 15 instances (note how this is becoming increasingly rare), 11 days were positive (+73%) for a cumulative next day gain of +37% or an average of +2.5%. The maximum next day gain was 10.0%, while the maximum loss was -9.7%. The specific instances and next day index change close-to-close (and VIX) are shown in the table below:

04/13/2000 -9.7% (29)
09/20/2001 -3.4% (44)
11/10/2000 -1.9% (29)
12/15/2000 -0.0% (27)
06/18/2001 +0.6% (23)
02/22/2001 +1.2% (27)
11/30/2000 +1.7% (30)
06/21/2002 +2.1% (27)
08/05/2002 +5.2% (45)
09/21/2001 +5.7% (43)
07/23/2002 +6.1% (45)
10/08/1998 +6.1% (46)
08/31/1998 +6.6% (44)
11/13/2000 +7.2% (29)
04/14/2000 +10.% (33)

Max. 10.0%
Min. -9.7%
Med. 2.1%
Ave. 2.5%

Today's VIX is straddling 30. Looking at just four successive down days irrespective of degree, there were 49 next day gains (+60%) averaging about +0.8%. I'm sure that I'm dating myself with this link, but remember this b-movie? The five-day MA is proving resistance here for the S&P 500; that taunt link is as good a jinx as any for another downside "outlier"!

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