Thursday, May 22, 2008

Nasdaq Net New Highs Potentially Ominous

With my beloved Celtics on late tonight I likely won’t have time to post. So here’s a little mid-day study for you.

Since early April the Nasdaq has been a leading index. Net new highs have failed to expand, though. According to my data provider, they peaked at 64 on May 2nd. The last few days there have been significantly more new lows than new highs. If you take the net difference and divide it by the number of stocks trading on the Nasdaq your result for Tuesday and Wednesday was less than -1%. (Wednesday: 53 new highs – 93 new lows = -40 net / 3030 issues = -1.32%). Coming off a 4-month (80 day) high this is an unusual occurrence.

I looked back to 1994 (as far back as I had the data) to see if I could find other times where the Net New High Percentage ratio closed below -1% twice within 3 days of an 80-day high. I found three other dates 7/23/98, 7/20/07, and 11/02/07. Charts below (click to enlarge):

Pretty ugly.

If I allow for two -1% Net New High Pct days within a week (rather than 3 days) of the top then 10/15/99 also shows up.

The bulls better hope this time is like 1999.


Bill Luby said...

Good stuff, Rob.

Hoping for another 1999? Hmmh, that sounds ominously like more of a matter of "How long before we are in really deep doo doo?"

Bearish, but open minded,


Damian said...

Rob - I get the idea, I just don't see what it shows on those charts. It doesn't look to me like that's an 80 day high in the net new highs. Can you clarify?

Go Celts!


Anonymous said...

Damian, I believe it's the 80 day high of the Nasdaq index. Jimmy

Rob Hanna said...

Jimmy's right. Nasdaq Composite makes 80 day high and then new lows swamp new highs immediately upon pullback.

Sorry for the confusion.


mOOm said...

With the small sample and variable results I'd say there wasn't any signal there...