MarketThoughts.com Market Thoughts
 
 
Links | Sitemap | Search:   
  Home  > Commentary  > Archive  > Market Commentary  

Special Alert: NASDAQ COMP Severely Oversold

(January 9, 2008)

Dear Subscribers and Readers,

I hope all of you got my signal to cover our 50% short position in our DJIA Timing System and to concurrently go 50% long during this morning's session.  I am writing again to bring attention to you to the following chart which in essence, is somewhat related to the SPX chart that I had showed you in last night's commentary:

Daily High-Low Differential Ratio of the Nasdaq vs. the Nasdaq (January 2001 to January 9, 2008)

The above chart shows the NASDAQ Composite Daily High-Low Differential Ratio from January 1, 2001 to January 9, 2008.  This is calculated by taking the daily difference between the number of 52-week highs and number of 52-week lows on the NASDAQ Composite and dividing it by the total number of all NASDAQ Composite issues outstanding.  This ratio just spiked down to a reading negative 18.26% - which represents the most oversold reading since October 8, 1998, when it reached negative 24.27% (not shown on this chart).  Curiously, even during the bursting of the NASDAQ bubble from 2000 to 2002, we had never gotten a reading as oversold as this.  The closest we came was on September 21, 2001, when this ratio touched a low of negative 17.45% in the aftermath of the September 11th attacks.

More importantly in a space of only five months we have already seen three such spike downs.  Based on the 30 years worth of high-low data I have on the NASDAQ Composite, this is truly unprecedented.

As I mentioned in last night's commentary, either we crash at this level, or we bounce around for a few more days and then take off on a tradable rally a rally which could potentially last months.  Should the market fail to crash by Monday morning, then we intend to go 100% long in our DJIA Timing System.  We will provide more details in this upcoming weekend commentary.

Best of luck,

Henry To, CFA

Article Tools

Subscribe to this FREE commentary

Discuss this page

E-mail this page to your friends

Printer-friendly version of this page

  Copyright © 2010 MarketThoughts LLC. | Privacy Policy | Terms & Conditions