Overbought Nasdaq With Low Spxy Reading Suggests Downside

We’ve seen numerous times how low Spyx readings typically lead to weakness or at least underperformance over the next few days. Both the S&P and the Nasdaq posted low readings on Monday. I decided to look at the situations where an extremely low reading came in an extremely overbought market as we’re seeing currently with the Nasdaq. This first test uses a Spyx level of 20 or below:

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A short-term bearish edge is apparent based on the above. Not shown but also notable is that 85% of all instances closed lower than the close of the trigger day at some point in the next 3 sessions.

The actual Nasdaq Spyx reading Monday was about 5. Lowering the Spyx requirement from 20 to 10 produced the following results:

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Instances here are a bit low but it appears the edge is even more pronounced with the extremely low Spyx reading.

A chart with the current S&P 500 Spyx reading is updated on the home page each night.