S&P 500 Index, SPX, Nasdaq Composite Index – Price Outlook:
Only 18% of the members in the S&P 500 index are above their respective 20-day moving average.17% of the members in the Nasdaq Composite Index are trading with 14-day RSI below 30.What does it mean for the trend going forward?
Recommended by Manish Jaradi
Traits of Successful Traders
Market breadth in US indices has weakened recently, with some indicators around multi-month lows. From a contrarian perspective, it could reflect oversold conditions, pointing to a minor rebound ahead of the US earnings season.
S&P 500:
As of Friday, around 18% of the members in the S&P 500 index were above their respective 20-day moving average (DMA). Data from 1996 onwards suggests that when 17%-20% of the members were above their respective 20 DMAs, the index was up 67% of the time over the subsequent 30 days. That is, in such instances, 67% of the time the index returns have been positive over the subsequent one-month period based on historical performance (see the distribution plot).
Distribution plot of S&P 500 index returns when 17%-20% of members are above their respective 20-day moving average
Data Source: Bloomberg; Chart Created by Manish Jaradi in Python
Similarly, data from 1996 onwards suggests that when 21%-24% of the members were below their respective Lower Bollinger Bands, the index was up 66% of the time over the subsequent 30 days. That is, in such instances, 66% of the time the index returns have been positive over the subsequent one-month period based on historical performance (see the distribution plot).
Distribution plot of S&P 500 index returns when 21%-24% of members are below their respective Lower Bollinger Band
Data Source: Bloomberg; Chart Created by Manish Jaradi in Python
Furthermore, as of Friday, 17% of the members in the S&P 500 index had the 14-day Relative Strength Index below 30. Data from 1996 onwards suggests that when 15%-18% of the members had their 14-day RSI below 30, the index was up 68% of the time over the subsequent 30 days. That is, in such instances, 68% of the time the index returns have been positive over the subsequent one-month period based on historical performance (see the distribution plot).
Distribution plot of S&P 500 index returns when 15%-18% of members are trading with 14-day RSI below 30
Data Source: Bloomberg; Chart Created by Manish Jaradi in Python
Nasdaq Composite Index:
As of Friday, around 23% of the members in the Nasdaq index were above their respective 20-day moving average (DMA). Data from 2002 onwards suggests that when 22%-25% of the members were above their respective 20-DMAs, the index was up 72% of the time over the subsequent 30 days. That is, in such instances, 72% of the time the index returns have been positive over the subsequent one-month period based on historical performance (see the distribution plot).
Distribution plot of Nasdaq Composite index returns when 22%-25% of members are above their respective 20-day moving average
Data Source: Bloomberg; Chart Created by Manish Jaradi in Python
Similarly, data from 2002 onwards suggests that when 12%-15% of the members were below their respective Lower Bollinger Bands, the index was up 62% of the time over the subsequent 30 days. That is, in such instances, 62% of the time the index returns have been positive over the subsequent one-month period based on historical performance (see the distribution plot).
Distribution plot of Nasdaq Composite Index returns when 12%-15% of members are below their respective Lower Bollinger Band
Data Source: Bloomberg; Chart Created by Manish Jaradi in Python
Furthermore, as of Friday, 17% of the members in the Nasdaq index had the 14-day Relative Strength Index below 30. Data from 2002 onwards suggests that when 16%-19% of the members had their 14-day RSI below 30, the index was up 65% of the time over the subsequent 30 days. That is, in such instances, 65% of the time the index returns have been positive over the subsequent one-month period based on historical performance (see the distribution plot).
Distribution plot of Nasdaq returns when 16%-19% of members are trading with 14-day RSI below 30
Data Source: Bloomberg; Chart Created by Manish Jaradi in Python
Recommended by Manish Jaradi
Elliott Wave for Beginners
— Written by Manish Jaradi, Strategist for DailyFX.com
— Contact and follow Jaradi on Twitter: @JaradiManish
element inside the element. This is probably not what you meant to do!
Load your application’s JavaScript bundle inside the element instead.
Source link
