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Actionable news in QQQ: PowerShares QQQ Trust, Series 1,

Is The Recent Rally Getting Too Thin? (QQQ)

With the major stock indices continuing to score new all-time highs, the market appears to be a well-oiled machine right now. However, looking under the hood, we find that, at least recently, the market has not been firing on all cylinders. We have 2 pieces of evidence regarding yesterday’s new high in the Nasdaq 100 (NDX) to support that diagnosis in today’s Charts Of The Day.

First off, while yesterday’s 0.23% gain in the NDX wasn’t exactly electrifying like last Friday’s Amazon-led rally, it nevertheless was a 52-week high. Despite the new high, though, there was not a whole lot of participation among stocks at the Nasdaq exchange. In fact, at just 33.8% of all issues on the exchange, the percentage of Advancing Issues was the 7th lowest ever on a day the NDX hit a 52-week high.

And if we combine the mere 45% of Advancing Volume on the exchange, yesterday was among the thinnest new highs on record going back to the 1980?s in the NDX.

Taking a look at the broader small-cap Russell 2000 Index (RUT), we see another manifestation of yesterday’s thin new high in the NDX. Specifically, despite the NDX’s new high, the RUT was actually down over 1%. That marked just the 5th 1% loss ever in the RUT on a day the NDX scored a 52-week high.

This chart shows the 9 times the RUT lost at least 0.9% coinciding with an NDX new high.

So was yesterday’s NDX high merely an outlier coming on the heels of a well-participated rally since August? Or has that participation run dry, leaving the market in serious danger once the relatively few advancers turn south?

In a Premium Post on The Lyons Share, we break down these historical divergences between the NDX, breadth and the Russell 2000 on a quantitative basis – and assess the likely degree of risk they pose within the context of the current market.

The PowerShares QQQ ETF (QQQ) rose $0.68 (+0.45%) in premarket trading Wednesday. Year-to-date, QQQ has gained 29.04%, versus a 16.10% rise in the benchmark S&P 500 index during the same period.

QQQ currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 36 ETFs in the Large Cap Growth ETFs category.

If you’re interested in the “all-access” version of our charts and research, please check out our new site, The Lyons Share. Considering what we believe will be a very difficult investment climate for perhaps years to come, there has never been a better time to reap the benefits of our risk-managed approach. Thanks for reading!

Disclaimer: JLFMI’s actual investment decisions are based on our proprietary models. The conclusions based on the study in this letter may or may not be consistent with JLFMI’s actual investment posture at any given time. Additionally, the commentary provided here is for informational purposes only and should not be taken as a recommendation to invest in any specific securities or according to any specific methodologies. Proper due diligence should be performed before investing in any investment vehicle. There is a risk of loss involved in all investments.

This article is brought to you courtesy of Dana Lyons, JLFMI and My401kPro.