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NASDAQ 100 Update - 3 Days Down 7+%: Now What?

by: Jeff Pietsch November 11, 2007 | about stocks: QQQQ    

Jeff Pietsch

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As one might imagine, the longer the duration of sell offs like these, the higher the odds of a mean reversion. Here is an update of Friday's post. As of the time of this writing, the NASDAQ 100 (QQQQ) has declined more than 7.25% over the last three days. This last occurred in August of 2002. Once again, I ran a quick scan back through 1998 to see what happens the next day when:

(a) The index is down three days in a row; and,

(b) The sum total is less than (more negative than) -7.25%.

Of the 52 instances, 36 were positive (69%) for a cumulative gain of 93% (average of 1.8%). The maximum next day gain was 10.8%, while the maximum loss was -9.9%.

Disclosure: Author has a long position in QQQQ

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This article has 3 comments:

  •  
    Nov 11 10:17 PM
    The Market is all about Averaging. When it comes to one of these Corrections points, to get some prospective on where the Bottom may be, I take the High and Low of the 52 Week average, and Average them. Guess where the Numbers are now? Yep, pretty close right now, near the Bottom of this Correction. This happens every Year, about this time, and it will happen again next year about this time span. If people just knew this, they wouldn't have to wonder. Do this on the Dow, S&P, and Nasdaq indexes, it will get pretty close!!!! ------Nelbender-------...
    Reply
  •  
    Nov 13 09:06 AM
    This particular blog thread is getting dull, but to play it out -- here we go. Downward momentum seems to be slowing, if not diverging on an hourly basis; short-term daily RSI is bottomed out; daily pivot S2 seems to be holding; Adjusted Tick is positive (see Steenbarger); the index is nearing in on a 62% Fibonnaci retracement; and the Financials and Transports are starting to pull on a relative basis (come on Semis). I know -- all technical observations that may amount to a hill of beans in this fearful, split market environment!

    As of the time of this mid-day post, the NASDAQ 100 is down more than 10% from recent highs, including four successive down days cumulatively exceeding -9.75%. Again, going back through 1998 (2,480 market days) looking to see what happens the next day when:

    (a) The index is down four days in a row; and,
    (b) The sum total is less than (more negative than) -9.75%.

    We find that of the 15 instances (note how this is becoming increasingly rare), 11 days were positive (+73%) for a cumulative next day gain of +37% or an average of +2.5%. The maximum next day gain was 10.0%, while the maximum loss was -9.7%. The specific instances and next day index change close-to-close (and VIX) are shown in the table below:

    04/13/2000 -9.7% (29)
    09/20/2001 -3.4% (44)
    11/10/2000 -1.9% (29)
    12/15/2000 -0.0% (27)
    06/18/2001 +0.6% (23)
    02/22/2001 +1.2% (27)
    11/30/2000 +1.7% (30)
    06/21/2002 +2.1% (27)
    08/05/2002 +5.2% (45)
    09/21/2001 +5.7% (43)
    07/23/2002 +6.1% (45)
    10/08/1998 +6.1% (46)
    08/31/1998 +6.6% (44)
    11/13/2000 +7.2% (29)
    04/14/2000 +10.% (33)

    Max. 10.0%
    Min. -9.7%
    Med. 2.1%
    Ave. 2.5%

    Today's VIX is straddling 30. Looking at just four successive down days irrespective of degree, there were 49 next day gains (+60%) averaging about +0.8%. I'm sure that I'm dating myself with this link, but remember this b-movie? The five-day MA is proving resistance here for the S&P 500; that taunt link is as good a jinx as any for another downside "outlier"!

    NEVER INVESTMENT ADVICE
    Reply
  •  
    Nov 13 09:06 AM
    This particular blog thread is getting dull, but to play it out -- here we go. Downward momentum seems to be slowing, if not diverging on an hourly basis; short-term daily RSI is bottomed out; daily pivot S2 seems to be holding; Adjusted Tick is positive (see Steenbarger); the index is nearing in on a 62% Fibonnaci retracement; and the Financials and Transports are starting to pull on a relative basis (come on Semis). I know -- all technical observations that may amount to a hill of beans in this fearful, split market environment!

    As of the time of this mid-day post, the NASDAQ 100 is down more than 10% from recent highs, including four successive down days cumulatively exceeding -9.75%. Again, going back through 1998 (2,480 market days) looking to see what happens the next day when:

    (a) The index is down four days in a row; and,
    (b) The sum total is less than (more negative than) -9.75%.

    We find that of the 15 instances (note how this is becoming increasingly rare), 11 days were positive (+73%) for a cumulative next day gain of +37% or an average of +2.5%. The maximum next day gain was 10.0%, while the maximum loss was -9.7%. The specific instances and next day index change close-to-close (and VIX) are shown in the table below:

    04/13/2000 -9.7% (29)
    09/20/2001 -3.4% (44)
    11/10/2000 -1.9% (29)
    12/15/2000 -0.0% (27)
    06/18/2001 +0.6% (23)
    02/22/2001 +1.2% (27)
    11/30/2000 +1.7% (30)
    06/21/2002 +2.1% (27)
    08/05/2002 +5.2% (45)
    09/21/2001 +5.7% (43)
    07/23/2002 +6.1% (45)
    10/08/1998 +6.1% (46)
    08/31/1998 +6.6% (44)
    11/13/2000 +7.2% (29)
    04/14/2000 +10.% (33)

    Max. 10.0%
    Min. -9.7%
    Med. 2.1%
    Ave. 2.5%

    Today's VIX is straddling 30. Looking at just four successive down days irrespective of degree, there were 49 next day gains (+60%) averaging about +0.8%. I'm sure that I'm dating myself with this link, but remember this b-movie? The five-day MA is proving resistance here for the S&P 500; that taunt link is as good a jinx as any for another downside "outlier"!

    NEVER INVESTMENT ADVICE
    Reply
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