Let's talk about Nasdaq. Let's begin with volume. Since last Wednesday's plunge, it has fallen off a cliff. Yes, I know the hallmark of this market has been to have lighter volume on rallies, but this time is a standout.
Last Wednesday, the day Nasdaq plunged nearly 160 points, volume was 2.3 billion shares. At the time, I highlighted the high volume for the QQQs, noting it was typically bullish to see such high volume on the downside for the QQQ. So we got the rebound.
Thursday, we saw a rebound with Nasdaq gaining back nearly 44 points. Volume was a relatively healthy 2.1 billion shares.
Friday, an expiration day, saw volume sink to just shy of 1.9 billion shares. Monday, Nasdaq rallied 50 points and volume sunk to 1.7 billion shares. Tuesday, the rally in Nasdaq was nothing to write home about, but volume was again 1.7 billion shares.
OK, so you can see the trend: lower volume each day as the index moves higher. Typical and not anything to fuss over. Let's move to net volume, where we see up volume minus down volume.
Friday, when Nasdaq gained 28 points, net volume had a decent reading of +820 million shares. Monday, Nasdaq rallied 50 points, almost twice what it rallied Friday. Net volume was +720 million shares. That is definitely not bullish on its own or compared to Friday's net volume.
As I have noted, Nasdaq was barely up Tuesday but net volume was now negative. Oh, it wasn't by much, just 50 million shares, but still. Now we have a trend of overall volume contracting and the difference between up and down volume shrinking as well.
Then there is the McClellan Summation Index using volume for Nasdaq. This last leg up has seen zero participation from it. And I don't mean the last leg up these last few days; I mean the rally from mid-April. The rally from 5800 to 6100 on Nasdaq. Can you find the rally on this indicator chart? I sure can't.
For now, the indicator has not turned down, but when you consider Nasdaq is at its highs, and a day where the net volume is -400 million or more will see it turn back down, you cannot say this rally has been widespread. You must admit, it's been narrow.
Heck, look at the number of stocks making new highs since mid-April. What direction do you see on the chart? That's during a 300-point or 5% rally.
I maintain the best thing this market can do is branch out, forget about the favored few, and hope that the have-nots pick up some buying interest. That means an upturn in this ratio of the Russell 2000 to the Nasdaq Composite. Because this current decline is too steep to be healthy.
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