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NASDAQ COMPOSITE: WORN TO A FRAZZLE? (0900 EST/1400 GMT)
At one point Monday, the Nasdaq Composite was down
more than 10% in just seven weeks from its late November record
intraday peak just before an upward reversal that saw the
tech-laden index close slightly higher on the day.
With this, one measure of internal strength is suggesting
the tech-laden index may be washed-out, and ripe for a bigger
recovery:
The 10-week moving average (WMA) of the Nasdaq
advance/decline (A/D) ratio, has plunged to 82%, or its
lowest level since an 81% reading in early July 2010. That 2010
low marked the end of a near 20% nine-week slide in the index.
In 2011, this measure bottomed in early September at 83%. It
then converged into the Composite's early October trough. The
IXIC fell around 7% more over the final four weeks of what would
become a 20%, 22-week decline.
Two additional near 20% sell-offs then ended in summer 2015
and early 2016, lasting five and 10 weeks, saw this measure
bottom at 88% and 87%.
More recently, after a 24%, 17-week swoon that concluded in
late December 2018, this measure bottomed at 84%. Then in early
2020, in the wake of a near-33%, five-week, collapse, this
measure became washed out at 84%.
The fact that the 10 WMA of the A/D ratio is already as low
as it is after an IXIC drop of only around 10% is a testament to
just how weak the broader Nasdaq has been. The Nasdaq daily A/D
line topped in February 2021, and ended Monday at a 16-month
low.
It now remains to be seen where the 10 WMA of the Nasdaq A/D
ratio will end the week. Of note, in 2008, in the depths of the
Great Financial Crisis, it fell as much as 68% in November,
before converging into the Composite's March 2009 low.
(Terence Gabriel)
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(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)