Hi-Ho, High-Low
One of the better short term indicators that I follow is the high/low index on the Nasdaq. This index is so simple that it can be calculated by a fifth grader, yet so telling that you can use it to spot potential opportunities when the market gets to extremes.
The Nasdaq high/low is the ratio of stocks on the Naz that are hitting new highs divided by the total number of new highs and new lows, expressed in terms of percentage. Assuming you have access to daily data on the number of new highs and new lows, you can set up an Excel spreadsheet to do the calculations. It’s pretty low tech. Guys like me appreciate that. Once you get a daily percentage, then just track it on a 10 day MA.
What I’m seeing now is that the Nasdaq High/Low is at 6%.
Simply put, almost 20 times more stocks are making new lows vs. new highs. Anything below 10% is considered a “washed-out” and very oversold market. The only other times the high/low was recently at these levels was in January and March of this year.
A move to below 6% would put the occurrence at more than 2 std deviations from the mean. In other words, statistical probabilities point to this as a rare situation that probably won’t last for very long.
Confirmation of a short term bottom in the Naz would be if the high/low increased to 12% from where it’s at now.
Consider also that putting in a bottom in the market is a process, not an event. We are now at what appears to be a third “bottom” in the past 6 months.
Just saying…..
I’m still bearish, until the market convinces me otherwise.
July 9th, 2008 at 1:54 amIn other thoughts, airline industry and transportation industry rallied incredibly and REFINERIES (who mainly dont have reserves like those big oil co’s.) were stuck with above avg volume for all these:
VLO
SUN
WNR
TSO
If oil BTFD, Im heavily in these, expect I highly doubt it will happen.
July 9th, 2008 at 1:58 amDon’t forget the oversold autos …. F & GM
and chemicals like EMN & SOA….
VMI looks good here too with the fertilizers reversing like IPI and SQM held up pretty well.
Memo: Besides shorting COF and V for the next leg down, check out PRAA long … just a thought.
July 9th, 2008 at 2:11 amcough..looks like oil WILL not breakdown
July 9th, 2008 at 2:17 am1.tensions rise (Iran weapons testing)
2.sliding dollar tonight
3.CHF (safety net for currency traders) rising
4.Never bet against OIL when Iran president/Russian president are secret buddies (imo).
IG-
You may be on the right track. When sectors begin to reverse up is often when the news is the worst.
Nobody rings the bell to start buying washed out stocks.
Even the worst stocks have periods when they outperform the market.
The market is sometimes like your typical lying SOB. It appears to say one thing and then does another.
July 9th, 2008 at 2:19 amThe only thing that explains it is:
The rally is mainly short covering to reduce exposure!
Since there are no economical data reporting tommorrow, i doubt we will see alot of action except for momentum players nibbling onto whatever momentum is left from some short covering.
Only if oil stays and appreciates even a bit, im shorting some airlines…hehehe.
July 9th, 2008 at 2:28 amDisinflation / Inflation global recession /slowing growth Political tension …the news is out to confuse.
Follow price and volume right now and turn down the news…its the only way to hear the market right now. don’t let your biases trap you into bad trades.
Disinformation is the game played by the street set to beat the little feat.
July 9th, 2008 at 9:26 amBuying airlines? Buying refiners? WTF– did I miss investing 101 at ibankcoin? If its down 60% YTD (Airlines)and has no relevant products (GM — no fuel efficient cars that anyone will buy), why are you buying them? Maybe on an intra-day trade, but the only reason airlines don’t all go bankrupt is because of the cash flows they generate that allow them to operate… Simply put, not profitable. F*ck airlines, f*ck refiners. Any bounce, get short.
Random tangent — WTF is going on with the option volume in CROX? Somebody came in and bought 32,000 Sept. $7.50 calls — more than 30x the open interest of 900ish.
Anyways, since the Naz is incredibly oversold by your measurement, how are you playing it, Alpha? Short QID? Short REW? Long QQQQ? Let me know, great insight. peace.
-J. Coryea
July 9th, 2008 at 10:57 amAgree. Airlines make absolutely no sense. The business model sucks. It’s purely a speculative play if ^IG^ is considering it.
However, that is one sector that I do not invest in—at all, ever.
Refiners make more sense from the standpoint of a decline in oil prices. I think the low end is $100, assuming a strong dollar. That’s a lot to assume right now.
July 9th, 2008 at 11:21 am“5th grade”…so most of America will be able to understand this.
July 9th, 2008 at 11:36 amNo such thing as a triple bottom…so I’ve heard.
GW,
check out the spx during 2004
July 9th, 2008 at 11:45 amGW,
Not saying they will understand this or be able to act on it. Only that they should be able to calculate it. There’s a difference
“Triple bottom” is a matter for rhetoriticians (is that a word?) and English professors…semantics. A “bottom” is singular. Triple bottom implies more than one “bottom”, which is not singular. A bottom is a bottom is a bottom.
Maybe it should be called “a decline to support levels three different times”. An alternative would be “a decline to where demand overstripped supply on three separate occasions within the framework of the supply / demand phenomena”.
Triple bottom is more succinct.
July 9th, 2008 at 11:45 amA’ Dawgg,
July 9th, 2008 at 11:40 pmLOL mon.I was hoping someone besides 50 bloggers could get it. You think CNBC hosts would get it without a teleprompter? I know Guy Adami would have that confused look on his face.
Chiva’,
July 9th, 2008 at 11:47 pmThat was during a gearing up to upward GDP growth coming out of War fears and recession.
Peak to trough was 100 points or about 11.6%
Were down from the top 20% plus a looming recession God forbid depression.
We are “technically not in a recession” but our markets are in the bear lair.
I knew I should have shorted instead of having gone long. Sometimes I just don’t know why I’m full of hope.
I will see the doom of Chivas’s rally monkey.
Not the least because the little fucker is a Red Sox fan.
_
July 10th, 2008 at 12:55 amGW,
with all due respect, the fed actually started hiking rates in 2004 and the economy was already out of recessionfor well over a year. as far as war, do you mean that little skirmish that took us 2 weeks to win?
i am very well aware that the circumstances are very different today, however it does negate the fact that the spx did “triple bottom” in 2004.
July 10th, 2008 at 4:29 amJake,
with all due respect, you’re wrong. from 1963- 1967 i lived in nyc. my dad used to take me to a lot of yankee games. i have been a yankee fan since i was 8. therefore that little fucker has been converted to a yankee rally monkey. as you know, unlike those fucking mets we win a lot more than we lose. lol.
July 10th, 2008 at 4:37 amChivas… I haven’t looked at him in awhile, but I could’ve sworn he was wearing a “Sawx” jersey. And I remember that little fucker from 2004, as well.
_
July 10th, 2008 at 11:26 amJake,
will change that jersey right away lol.
July 10th, 2008 at 11:28 amJake,
The “BoSawx” scored 18 runs yesterday against the Twinkies. Their bats are starting to come alive again.
Egregious note for the day: A-Rod will take down the Yanks for the remainder of the year. He has invited the rest of his teamates to party with him and Madonna after concerts. A-Rod and the potential for many drunk Yankees will cause many people, including the Moral Majority to leave the Yanks in droves.
July 10th, 2008 at 11:34 amChivas,
My mistake… that was the California Angels in 2006 that used the Rally Monkey. I just got “word” from the source, by bullshit Red Sox fan brother in law.
_
July 10th, 2008 at 11:38 amA-Rod banging Madonna… it’s like a corrupted, latter day Dimaggio and Monroe situation.
Plus ca change…
__
July 10th, 2008 at 11:40 am