The Nasdaq's internal momentum has been waning

Arguably the two biggest stories in sentiment this week are the continued explosion in speculative options activity and nascent signs that the momentum bubble in the Nasdaq has been pricked. The two are related and will have a big impact on overall market returns going forward. 

As for the Nasdaq's momentum, the 10-day average of its Up Volume Ratio has slid below 50%. 

There are all kinds of ways to define market environment and momentum, and using an average of Up Issues or Up Volume is effective on a short- to medium-term time frame.

We can see from the chart that the Nasdaq's annualized return when 10-day Up Volume is above 50% is a very robust +20.9% while below 50% it's a lowly zero. The Composite tends to struggle when Up Volume is negative but not negative enough to be oversold.

This ended the Nasdaq's 3rd-longest streak in 35 years with 10-day Up Volume above 50%. The longest streak ended in September 1995, almost exactly 25 years ago, and it preceded a couple of months of a choppy decline.

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We also looked at:

• Table showing full returns after the ends of long streaks with positive Up Volume
• What happens after 50-day windows with the strongest correlations to the past 50 days in the Nasdaq
• The Nasdaq hit a new high, then saw a large uptick in volatility - what that's meant in the past