What Happened To The Nasdaq 100 Leaders?

The dip buyers were disappointed after the release of the better-than-expected CPI report on Thursday. The S&P 500 opened almost 20 points higher to open at 4487.16 after Wednesday’s close at 4467.71. The buyers flooded in as the S&P reached the monthly pivot at 4527 at 10 AM ET before the buyers disappeared. Just after 100 PM the S&P 500 was lower for the day.

This happened so quickly that some were confronted by the reality of recently added positions already being in the red. The close in the S&P 500 was a bit higher but the lows from the past few days were violated. There was very little mention of this price action in the financial media but to me, the action in the market internals was even more surprising and significant.

Just before 10 AM ET I took my early reading on the market internals and found that 83.8% of the S&P 500 stocks were advancing. For the Nasdaq 100, 88% were advancing. Since the A/D lines were still negative after Wednesday’s close that was not as bullish to me as it was to others and was not a reason to buy.

That was a good decision as by the close a slight majority of the S&P 500 stocks were now lower for the day (7%) while only 18% of the QQQ
QQQ
stocks were higher. This was further confirmation that the correction from the July 27^th highs was not over.

For the week the Dow Jones Utility Average was up 0.9% but is still down 7.6% year-to-date 9YTD. The Dow Jones Industrial Average was up 0.6% while the other markets were lower,

Both the Nasdaq 100 and the iShares Russell 2000 were down 1.6% for the week followed by a 1.4% decline in the SPDR Gold Trust. The Dow Jones Transportation Average was down 0.7% while the S&P 500 declined 0.3%.

On the NYSE the A/D numbers were negative with 1362 issues advancing and 1689 declining. On the NYSE there were more New Highs than New Lows but not on the Nasdaq Composite.

All of the weekly advance/decline lines are positive but are declining as the Spyder Trust (SPY
PY

SPY
) made its high at the end of July at $459.44. It is down just over 3% from the high with the rising 20-week EMA at $430.93 which corresponds to the QPivot at $430.44.

The S&P 500 Advance/Decline has been leading stocks higher since last October’s low. It is still well above its rising EMA which is a sign that a correction could last until September. The NYSE Stocks Only A/D line has dropped back below the August high, line b, but is well above its EMA. The NYSE All A/D line is acting stronger as it has been able to overcome the March 2022 high.

The Invesco QQQ Trust (QQQ) has dropped into the first support zone (in yellow). The daily starc- band is at $359.47 with the early June high at $357.40. This is 2.4% below Friday’s close so this support could easily be reached in the coming week.

The Nasdaq 100 A/D line has closed just above the converging support at lines b and c. This makes an oversold rally likely in the next week or so. There is more important support for the A/D line at the June lows. Only 27% of the QQQ stocks are above their 10-day MA but it can get down to the 10% area before it is very oversold.

The relative performance (RS) peaked in the first part of July and has been below its declining WMA for the past seven as QQQ has stopped leading the SPY. A drop below the support would be more negative for the QQQ.

In the two weeks since the high in the S&P 500, the expected changes in the market leadership have started to emerge. On July 24^th, as part of The New Nasdaq 100 List To Watch, a new watch list was introduced with my colleague Jerry to track the multi-timeframe technical readings of the big tech leaders. It utilizes multi-timeframe analysis to assess the strength or weakness of market sector ETFs as well as individual stocks. The Dynamic Trailing Stop (DTS) adapts and learns with each closing value for each time frame which is colored green for positive or red for negative. The chart above is from July 21st while the chart below is from August 11^th.

As of July 21^st 100% of the stocks were above their QPivots and had positive WK_DTS readings. As of Friday’s close, only 75% are above the QPivot with 50% showing positive WK_DTS. Two stocks, AVBO and NVDA turned negative, as they were down 5.9% and 3% respectively. Only three, AMZN, META, and GOOGL, are still positive based on the 3DTS.

Jerry A and his research group including Excel Pro Scott Corwin have completed a similar analysis on all eleven sectors and their largest holdings. Some sectors are starting to look more interesting but of course in addition I look at the RS analysis on each of the sectors.

The Technology Sector Select (XLK
XLK
) is down 8% from its July 19 high at $181.46. The daily studies weakened after that high and by August 1^st, line a, they were both negative as the OBV and RS had failed rallies back to their WMAs. They show no signs yet of the bottom so XLK may eventually decline to the $158-$160 area.

The RS analysis has agreed with the multi-time frame DTS analysis as a majority of time frames are negative. CSCO is the strongest as it is all green while both INTU and ADBE
DBE
are still maintaining all positive readings.

I will be periodically posting this analysis on Twitter and I am closely watching the analysis of the energy sector which is currently 100% bullish. The grid analysis should give us some good insights on how long to hold on to longs in the energy ETFs as well as the individual energy stocks.

Until there are signs from the daily advance/decline analysis that the correction is over I will remain defensive as both the SPY and QQQ do not perform well in either August or September.