Nasdaq stocks haven't done this for 3 months



For the first time in months, the momentum in securities traded on the Nasdaq exchange has turned positive.

After a furious rally to start the year, so many stocks were churning that breadth on the Nasdaq couldn't surpass its highs at the start of the year. By mid-summer, it turned outright negative and stayed there until last week. 

The Nasdaq McClellan Summation Index turned positive

This has ended a streak of 77 days in negative territory for the Nasdaq McClellan Summation Index, among the longest streaks since the end of the Global Financial Crisis. 

Only 6 other periods saw the Nasdaq's Summation Index stay in negative territory for longer. After those streaks ended, the Nasdaq Composite gained an average of nearly 19% at some point within the next year.

What's especially notable about the current flip to positive momentum is that it triggered as the Nasdaq Composite was on a run to new highs. Since 1986, there have been 8 similar signals.


What else we're looking at

  • How the Nasdaq performed after other times the Summation Index turned positive
  • Why context matters when momentum turns positive
  • Using the 17 level in the VIX as a line in the sand
  • What relative performance in the Russell 2000 is signaling about future returns

Stat box

More than 1/3 of Technology stocks are now overbought, according to their Relative Strength Index (RSI) readings. After the 58 other days that showed such a broad level of overbought stocks, the XLK fund showed a flat average return over the next month.

Etcetera

Chile is hot. Over the past week, the Optimism Index on the ECH fund has soared to 85%. Other bouts of extreme short-term optimism have tended to occur after protracted downtrends, ultimately leading to higher prices over the next 6-12 months.

Optimism on Chilean stocks is soaring

BTFD in Discretionary stocks. The XLY Consumer Discretionary fund has enjoyed an average inflow of more than $100 million per day over the past week, despite the price pulling back in recent days. This is the largest 5-day inflow of 2021.

The XLY fund is seeing big inflows

Time for Treasuries. The price of 10-year Treasury note futures has mostly followed its typical seasonal pattern (the path, not the magnitude). If it continues, prices should continue to rise into December.

10-year Treasury seasonality is positive

The post titled Nasdaq stocks haven't done this for 3 months was originally published as on SentimenTrader.com on 2021-11-10.

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