Nasdaq Relative Strength Continues To Rise
Published February 5th, 2009 in Technical Analysis Tags: banks, bull market, financial sector, nasdaq composite, relative strength, S&P500 index.While this bear is busy mauling everything in its path, there are some pockets of strength. One of them is right under our very noses: the Nasdaq composite index.
The individual charts of the Nasdaq composite and the S&P 500 Index, each show a crushing bear market. But the relative chart shows that out of the two, the Nasdaq is surprisingly strong.
Going as far back as 2006, Nasdaq’s relative strength has been putting in higher highs and higher lows.
But before we can get excited, the ratio of the Nasdaq to the S&P 500 ratio has to break 1.90 - that’s because since 2004, it has been in a holding pattern below that level. The last time it broke through was in early 1999, and you know the rest of that story.
Financial Sector
Of course, the sector that has everyone’s attention is the financials: banking, investment houses and brokerages. Although technically, a bull market doesn’t need the financial stocks leadership, this market has been primarily driven by the bank stocks because they have been the protagonists in this tragedy (or farce, depending on your point of view).
Today, the financials make up only about 10% of the S&P 500 index. So in a twisted sense, this sector has fallen so much that from here on in, it has much less weight to influence the general index. And that might be a good thing because while it may take decades for the US banks to come out from under the shadow of government intervention into some semblance of normalcy, the rest of the market can push forward.
banks, bull market, financial sector, nasdaq composite, relative strength, S&P500 index
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Yes bull don’t need financial sector to rally, BUT NOT WITH FINANCIAL SECTOR AT 0… IF our financial system fails, will there be a market left? No bull nor bears… we are in deep sh** here. Either we have a massive deflation or a massive inflation… IF OTHER COUNTRY WILL NO LONGER buy our IOU and FED start buying, sh** we going to monetizing our debt which will nuke USD! So however much money you make will get nuke instantly by inflation. Or else we will have to pay back the debt by working hard. But the problem WILL THERE BE ANY WORK LEFT FOR AMERICANS? American can not compete with Chinese nor Southern American countries. Sh** American had too easy of life for waaaay too long (fu**ing unions)… So hard work? not a chance… so massive deflation worst then the GREAT DEPRESSION, YES… So we are fu** either way, I don’t know how people like you keep thinking market will be going up JUST BECAUSE IT WENT DOWN SO MUCH( your definition of so much).
I hope you are not in the group of http://carlfutia.blogspot.com/ which in my mind, is AN IDIOT! SPX go to 1600s??!! WTF?
Is this the RSI? If so, what period is it measuring. If not, how is this calculated?
Thanks!
I am idly working on a personal indicator that diminishes relative strength of financials - within my overall direction sentiment, and am trying to figure out the relative correlation #s.
Thanks for providing some food for thought!
We are in a bear market rally that maybe has another week or two before more downside begins based upon the intermediate timing tools I use including the McClellan Summation Index, the Cumulative Volume Index, and the weekly Short Term Volume And Price Oscillator which have all pointed up until recently while the market has made no headway whatsoever. This tells me, the lack of strength is likely to resolve to the downside rather than suddenly catching up with a surge of strength. Be on guard and tighten stops.
By the way, in reference to an earlier comment, with total credit market debt approaching $20 trillion, the Fed is not going to be able to monetize their way out of this economic downturn even if it directly bought half of the bonds and notes issued to fund the deficit, which it has never done. The lack of private sector borrowing virtually guarantees continued deflationary pressures for a long time unless we can induce massive private sector borrowing again. Nationalization of banks anyone?
There are inverted H and S patterns in practically every index. But there is also a lot of resistance and selling pressure. There could however be a big short squeeze on the financials- JPM, BAC and C seem prime candidates for that.