A Beaten-Up NASDAQ… Ready to Rumble?
By Dr. Paul Price of Market Shadows
I am not a huge fan of technical indicators but certain metrics are certainly useful in seeing where we are on the continuum of sentiment. When extreme levels of optimism or pessimism are reached it becomes much more likely to see a reversal than a move further away from normalcy.
Helene Meisler's Top Stocks published an interesting chart this morning illustrating how far the average stock in the NASDAQ composite has dropped. The number of new yearly highs divided by new yearly lows on that index now sits at the third lowest point since the start of 2012.
As of May 9, 2014 new NASDAQ highs were registering less than 30% of new 52-week lows. The most recent two times that happened previously led to multi-month rallies. The early February 2014, dip to a reading close to 50% preceded a shorter term surge. Negative sentiment was not nearly as pervasive back then as it is today.
