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Index Wrap

NASDAQ-100 achieves "bull confirmed" status

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In this weekend's "Ask the Analyst" column we looked closely at the Russell 2000 Index ($RUT.X) 587.00 +0.54% and discussed its seasonal bullish tendency that begins in November and runs through May.

On Friday, the NASDAQ-100 Bullish % ($BPNDX) achieved "bull confirmed" status for the first time since falling to "bear confirmed" status in February of this year.

NASDAQ-100 Bullish % ($BPNDX) Chart - 2% box size

Friday's action saw the narrower NASDAQ-100 Bullish % ($BPNDX) achieve "bull confirmed" status. These are the strongest of market internals and strongly suggests DEMAND is really starting to outstrip supply. Bulls and bears will most likely become more aggressive with pullback buying.

In this weekend's Ask the Analyst column we discussed the historical bullishness from November-May for Russell 2000 Index. The NASDAQ-100 has shown an average gain of 12.4% from October- January.

Tonight I'm going to place the new November MONTHLY pivot levels on the NDX.X point and figure chart (conventional box size 25- points) and also take a quick look at the past two years of trade. Remember, the letter "A" represents early October, while the number "1" represents early January. Look for the "A" and "1" in your bullish % charts.

With the NASDAQ-100 Bullish % ($BPNDX) just now reversing up to "bull confirmed" status, I would think the NDX.X and QQQ have a good chance at some handsome gains into January.

NASDAQ-100 Index (NDX.X) Chart - 25-point box size

On a pure supply/demand basis, it would take a trade at 1,525 for the NASDAQ-100 Index (NDX.X) to generate a reversing higher point and figure buy signal, and negate the current bearish vertical count of 1,125. But the odds of this happening become high (in my opinion) as the internals begin to show a greater number of stocks generating supply/demand buy signals from an intermediate level of bullish risk.

I've marked the past two October-January seasonal periods where from Oct. 2002 to early January 2003, the NDX.X would show a 24% gain, where more than likely, that percentage gain was boosted from a more deeply oversold condition as the bullish % was reversing up from as low as 14%.

From Oct. 2003 to early January 2004, the NDX.X would have shown a more modest 9.25% gain. Here perhaps the gain was limited as bullish risk was higher above 70%.

U.S. Market Watch - 11/01/04 Close

Aside from prediction regarding tomorrow's election results, which pollsters admittedly say is too close to call, further declines in oil was today's top headline. The conventional 25- cent box size now has the Continuous Oil Contract ($WTIC) from www.stockcharts.com still building its bearish vertical count, which is currently to $43.25. Today's low in the December Crude Oil futures (cl04z) contract was $49.25, and from Wednesday evening's Index Trader Wrap, this is where I thought we might find some firming. Now look for a little bounce back into that $51.50 area, and I think equity bulls then want to see oil get slammed back lower from there.

A trade scenario I see is that we now see some oil BEARS locking in some handsome near-term gains (it took some guts to short above $54 so oil bears should pay themselves by taking profits into Wednesday's weekly statistics report. If oil and distillate inventories show increases in inventory, that could then set the stage for a scenario of oil gravitating back lower towards $43- $44 per barrel.

Market Snapshot / Internals - 11/01/04 Close

Volumes were brisk, but it makes some sense that today's volumes were off of the NYSE's October average of 1.50 billion per day, and NASDAQ off its 1.72 billion per day.

If the MARKET ends up "happy" with things on Wednesday (election and oil prices) then I'd have to think a higher trade for the indices, and if "super bull" volume watchers would probably be looking form volumes to breach 2 billion shares on BOTH the NYSE and NASDAQ. I think if we were to see 2 billion at both the NYSE and NASDAQ, coupled with a higher trade, it would be a pretty good signal from the MARKET that it sees a good rally taking hold into the end of the year.

Pivot Matrix -

MONTHLY Pivot really seems to be the "levels" that stick out as a more meaningful near-term level of support. In today's 03:15 PM EDT I showed a chart of the Semiconductor Index (SOX.X) with conventional (BLUE) retracement and its MONTHLY Pivot levels in PINK. Now... see that WEEKLY R2 at 430? That's darned close to the conventional 38.2% retracement, and if violated to the upside this week, a bullish move there has MONTHLY R2 immediately in play.

S&P 500 Index (SPX.X) Chart - Daily Intervals

A couple of weeks ago, bears were looking for a short right in here, hopeful of a "right shoulder" to short. However, things may NOT have worked out to plan as higher oil prices and some problems with insurers (NY Attorney General) had the SPX.X falling to the 1,090 level.

IF we're looking for a bounce in oil (based on Wednesday's Wrap) then we might well expect the SPX to pull back into the 1,117- 1,120 "zone." Conversely, if bears have lost their conviction with oil's decline and the SPX unravels into what I consider the "right ear" the SPX could easily erupt to 1,152 by Friday's close.

Today's trade saw the broader S&P 500 Bullish % ($BPSPX) rise 1.13% with a net gain of 5 stocks to a reversing higher point and figure buy signal. Still "bear correction" status at 63.13% and it would take a still higher reading of 68% to achieve "bull confirmed" status.

Jeff Bailey

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