Sunday, July 08, 2007

NASDAQ Taking A Leadership Role

Above is a 3 year weekly chart of the NASDAQ/S&P ratio with bollinger bands. As you can see the bollinger bands were at their tightest just last month and now the ratio has broken out from this consolidation.

Many times when market volatility contracts it is usually followed by an expansion in volatility. This same phenomenon can be applied to ratio charts as well.

Looking at the above chart we see the ratio line is rising which means the NASDAQ is stronger than the S&P and because this ratio has broken out from such a tight bollinger band contraction, I think we will see volatility increase in the NASDAQ compared to the S&P. Basically what I am saying is that I have a feeling most of the action over the next few weeks may be in the NASDAQ not the S&P..


William said...

You don't even have to watch all of the Nasdaq...

Mike Panzner put out an interesting piece last week.

The Nasdaq-100 has been on a tear since bottoming on March 5th, gaining 12.77% through yesterday's close. Yet, if you break the technology-laden bellwether down into its 100 constituent members, it paints a slightly disconcerting picture. Despite all the talk from equity bulls about the health of the market and the rally's sustainability, the advance has been narrowly based.

Apple, for example, has played a major role in pushing the index higher, equating to more than 20% of the overall gain. The rallies in Apple, Google, and Intel account for nearly a third, while seven stocks comprise half the move in the NDX. Finally, 13 out of 100 stocks -- 13% -- are responsible for two-thirds of the overall advance.

While this heavy lifting by a small number of shares does not mean the index can't go higher still, history suggests rallies that lack widespread participation sometimes lack long-term staying power.

As the table below shows, most of the Nasdaq's gains are unusually concentrated last quarter in about a dozen stocks.

Data courtesy of Mike Panzner

Kevin said...

Thanks William

FTGGOG said...

XLE made a new high fri.Its is advisable to get in at the open?

Sorry, didn't know where to ask this. Thanks in advance.

Kevin said...

I don't have a position in XLE so I don't have an answer for you....

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