Tuesday, December 6, 2011

The Nasdaq's Strong Tendency Under Similar Circumstances Over the Last Decade

Many people are aware that several higher closes during a downtrend will often suggest a downside edge. Few people realize how strong this tendency has been in the Nasdaq over the last decade, especially once the index has closed up 4 days in a row. With the Nasdaq now up exactly 4 days in a row as of Monday’s close, the study below is triggering.



Not only has the bearish tendency been strong and consistent, but it has persisted for as long as 2 weeks in most cases.

Are you wondering why the 50-day low filter is included?  Here's why:

http://quantifiableedges.blogspot.com/2011/10/why-shorting-in-this-environment-can-be.html

8 comments:

BH_Trade said...

Just curious, I don't see any identified criteria to determine whether or not the Nasdaq is actually "in a downtrend". So is the output a result of any time the Nasdaq has closed up 4 consecutive days?

Rob Hanna said...

Thanks BH. I neglected to note the close must be below the 200-day moving average. I have made the correction in the study description above the table.

- Rob

Johan Lindén said...

Rob, your criteria is not met if I look in the charts of Stockcharts.com. And I double checked both QQQ, Comp, and NDX.

So, one should be a bit more skeptical to the data this time I think, since even if it is met by your data the criteria is just met by an "inch".

Johan Lindén said...

test

HurstCycle said...

@Linden. $COMPX showed 4 consecutive days up; emini @NQ and @NQ.D did not. This is a momentum exhaustion play; sometimes price collapses, sometimes it just slows and continues up.

Rob Hanna said...

Hi Johan,

Not sure what criteria you don't feel is met.

I am using the Nasdaq Composite Index for the study and it met all criteria as of Monday's close.

If it is the 200ma you are looking at perhaps you are using an EMA? I use simple moving averages.

Best,
Rob

Johan Lindén said...

My bad! I surrender. I just saw that it didn't match the Nasdaq 100, and then the Comp chart fooled me. At a closer look you are right. Just right!

However, after Wednesdays rally Nasdaq had one of its smallest standard deviation of the year from Thursday to Monday, and well, Tuesday too. Interesting to see what this means.

openbooktrader said...

Hi Rob. Just wondering. Have you done a similar study on going long when the market dips temporarily and compared this to when it made a 50-day high or not?