Trader’s Narrative

Last week the Nasdaq new highs, new lows indicator was just under 30 and I mentioned that although it had dropped it had yet to reach an extreme level which would presage a bounce.

After yesterday’s red day, it fell to just under 15. That’s low, but still I’d like to see it reach below 10 and move higher. In the past this is what we’ve needed to set up an intermediate bottom. For detailed information on this indicator, check this out.

Such a reading would mean that almost 90% of the stocks reaching 52 week extremes are doing so by hitting new 52 week lows.

Another way to look at the same sort of data is to look at the Nasdaq high/low ratio. That is simply divide the daily Nasdaq new highs by the daily Nasdaq new lows. This indicator shows pretty well the same thing. The market is oversold, but not yet to an extreme level.

We may get a feeble bounce today as the market reacts but for a really good washout, we need more work to the downside. That may happen quickly or over the next few days and into next week.

However it works out, atleast through the looking glass of this indicator, we aren’t there yet. As you can see on the graphs below, we need to reach the green areas outlined:

Nasdaq New Highs New Lows Indicator:

Nasdaq New Highs Lows Ratio: