NYSE vs. Nasdaq: It's a Volume Business

 | Jul 14, 2017 | 6:00 AM EDT
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I know it looked as though the market drifted up all day, and it did. But it was the underlying movement that I found most interesting.

It is rare these days to get a more positive reading for net volume on the NYSE than on Nasdaq. Recently I have complained that the net volume on Nasdaq on a day-to-day basis has not matched the rise in the index. That's only partially true. Overall cumulative volume for Nasdaq has made a new high while Nasdaq itself has not.

And the NYSE cumulative volume continues to be much lower than the S&P, which is at its highs. Yet just looking at Thursday's action where the S&P was up not quite five points, we see net volume was +850 million shares. That might not sound like a big deal, but consider the previous day when the S&P was up nearly 18 points and net volume was +1.37 billion shares. That means in general Thursday's underlying movement or breadth was better than Wednesday's.

If we do the same exercise for Nasdaq, the 13 points gained on Thursday saw net volume at +110 million shares, which is basically flat. If we had more days like this (where NYSE volume improves), I do think we could see that Russell 2000 ETF (IWM) /Nasdaq 100 ETF (QQQ) chart move back up.

It has been my expectation that this would pull back and "rally" again, but it has not this week. So far, all we've seen is the pullback and no rally. However, if we get more days with statistics like I've just reviewed, I think we'll see this ratio move up again.

In the meantime, I was asked to check in on the Dollar Index again. You might recall I thought it would rally from the 86.50 area and it did, and then it died, so I was quite wrong. Here we see a potential double bottom at 85.50. It is too soon to say whether it will hold, but I do think it is quite interesting that the Daily Sentiment Index (DSI) for the euro has been over 80 for quite some time and it hasn't made a higher high in weeks. The euro is the largest component of the Dollar Index. As a reminder, the DSI measures the percentage of those bullish, so this means fewer than 20% are bearish the euro.

If the dollar can rally, I think small-caps can do better, and if small-caps do better, then the IWM/QQQ ratio should move back up. So it's all related. But there is a long way to go before the Dollar Index is out of the woods -- if it is going to move out of the woods.

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