LIVE MARKETS Nasdaq Composite: Sputtering thrust

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NASDAQ COMPOSITE: SPUTTERING THRUST (0900 EST/1400 GMT)

Amid recent Nasdaq weakness, one measure of internal strength is on the back foot again. That said, given that it is not far from its recent lows, traders will be watching its behavior closely. read more

Indeed, the Nasdaq New High/New Low (NH/NL) index, which topped at 96.4% in January 2021, and had been diverging for eight months into the Nasdaq Composite’s November peak, plunged to just 6% on January 28:

Late January’s 6% trough can be considered historically low and potentially washed out. Since the Great Financial Crisis, sub-10% readings have ultimately been closely associated with major IXIC lows.

With the Composite’s subsequent rally off its late-January low, the measure did improve to 22.2% on February 11. However, amid renewed jitters over the past week or so, the NH/NL index has turned down again. The measure ended Thursday at 17.6%, putting it just below its 10-day moving average at 18.6%.

And since this measure does not have a tendency to flat-line for long, but instead form V-bottoms and abrupt tops, traders will be watching to see if it will establish a higher-low vs a Nasdaq Composite lower-low, as it did in early 2016, and early 2009, or if it will break the recent trough and fall closer to zero, as it did in late 2011 and late 2018.

In March 2020, the measure simply reversed higher off its 1.2% trough, and did not look back.

(Terence Gabriel)

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Terence Gabriel is a Reuters market analyst. The views expressed are his own

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