While I usually focus on the S&P 500 as a market index, the NASDAQ has been more of a leading indicator the past month. It was the first major index to break down, and has been a laggard during this selloff. Despite the “off hours” rally we’ve experienced, it still sits below the 50 day moving average. Indeed, relatively substantially below… and the 20 day just crossed below the 50 day moving average, another negative sign. Of course all it takes is one nice gap up tomorrow of 1%+ in premarket to take care of all these conditions, but for now it is something to be aware of.
The S&P 500 is a bit more tricky – I like to use exponential moving averages and on that count, the premarket surge yesterday gapped the S&P 500 over the 50 day moving average. But it has been held back at the (less important) 20 day moving average. That said, the simple moving average is something more people seem to be focused on around 1303 and we remain below those levels. For now, we keep returning to this 1294 level which has been a big pivot point the past few weeks, and is currently the 50 day exponential moving average.
Again, with the news flow and increasingly much of the action now happening in the overnight sessions, this is a difficult market to get your hands around… but I still stand by the (perhaps now old fashion) notion that you don’t bottom on a “gap up” as we did Thursday morning. At minimum we should go retest that low… but a lot of old rules have become obsolete in the new paradigm. The great irony is this market is now solidly negative the past 4 sessions during American market hours…
Finally, circling back to a measure I noted Thursday morning, the % of stocks in the SP 500 over the 50 day moving average has quickly doubled (percentage wise) from the very oversold levels of the middle of last week.