A Key Nasdaq Indicator Just Sent an Interesting Signal
My call for a rally in the semis clearly did not come to fruition on Tuesday. That does not mean I have given up on it. In fact, considering Nasdaq and the SOX have been red for eight of the last nine trading days, I am still looking for a rally this week.
Aside from the reasons I listed here yesterday—and yes, some were quite anecdotal—there was the fact that when using the Nasdaq Momentum Indicator, when I do an exercise that walks Nasdaq down another one thousand points over the next week or more, the indicator not only stops going down, it ticks up. That is the definition of oversold.
Then there is the chart of the QQQs. We have still not seen the surge in volume I so love to see, but there is a line that I have been watching that connects all the sell-offs in the QQQs since mid-May, and the QQQs bounced off that line on Tuesday.
If you squint hard, you can see that when it bounced off that line in early June, the next day, the QQQs were down, but not to a lower low, and then we saw a nice rally from 690 to 750. Notice that the rally went to a lower high (followed by the lower high rally in late June). But it did rally.
I would like to remind you that the intermediate-term indicators are not oversold. The Hi-Lo Indicator is still at .35 (it gets oversold under .20). The 30-day moving average of the advance/decline line is not oversold. The Volume Indicator sits at 50%; oversold is 47% or under.
To that, let me add that the Daily Sentiment Indicator for Nasdaq is now at 41. That is neutral territory. But let’s say I am wrong and Nasdaq doesn’t rally this week, and instead it continues downward. Where do you think that DSI will be one week from today? I would say knocking on the door of the mid-20s.
Should that occur, I would expect the VIX to have jumped. Should that occur, I would expect the Hi-Lo Indicator would be at/near that .20 level. And surely we would have gotten a put/call ratio that is well over 1.0 by then. In other words, we are close to a bounce.
Let me conclude with the fact that I have stated I think in the month of August we see the others ‘catch down’. I continue to think that will be the case. Just notice how as soon as the semis started rallying on Tuesday, the drugs started selling off.
The Either/Or Market remains undefeated in 2026. I would love it if we had everything moving together. But that’s not the market we have.
