Market Sentiment (Stocks on NYSE, NASDAQ, AMEX)
Unchanged
299
Decliners
6822
Advancers
1760

Sept. 9, 2016, 1:08 p.m. EDT

Despite the ‘September factor,’ positives remain for the Nasdaq

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

  • X
    NASDAQ Composite Index (COMP)
  • X
    S&P 500 Index (SPX)
  • X
    NASDAQ 100 Index (NASDAQ Calculation) (NDX)

or Cancel Already have a watchlist? Log In

About Kevin Marder

Kevin Marder is a guest columnist and a co-founder of MarketWatch. He is principal of Marder Investment Advisors Corp. and a contributor to The Gilmo Report. Previously, he served as chief market strategist for Ladenburg Thalmann Co. and developed institutional fixed-income risk management software for Capital Management Sciences.

/conga/trading-deck/bios/marder_kevin.html 173642
The trading deck is powered by

By Kevin Marder


Getty Images

At this time of year, it is easy for an experienced market operator to adopt a certain wariness. This is especially true after a summer rally the likes of which we've just experienced. The reason is that the worst month of the year is purportedly September.

For the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -2.72% , since 1990 it has actually been August, not September, that has turned in the worst mean monthly return, -0.4%. September was close behind at -0.2%.

Despite this unfavorable tendency, there remain more positives than negatives.

Beneath the surface of the averages, the upright action seen in a raft of speculative growth titles in recent weeks continues. Hence, only negligible profit-taking has emerged in the wake of the nine-week post-Brexit run. A good cautionary indication would be if these names begin to break down in earnest on their charts.

Meanwhile, volume picks up as market participants complete their late-summer vacations, resulting in a return to fully staffed trading desks. In fact, Nasdaq Composite turnover was higher Tuesday and Wednesday than any other session over the last month.

For a larger chart, please click here .

Chart created using TradeStation . ©TradeStation Technologies, 2001-2016. All rights reserved.

The breadth of the advance stays solid, however, one medium-term indicator shown below indicates a negative divergence between it and the S&P 500 index /zigman2/quotes/210599714/realtime SPX -1.89% . The indicator, in blue, is the 10-day net high-low differential of New York Stock Exchange stocks. A proxy for the average stock, it is unable to match recent new highs by the narrower index.

Divergences like this are not precise timing tools. However, they do provide a look at medium-term market health. Left to fester, they usually lead to a decline in the narrower index. A closer look at the chart during the first quarter reveals a positive divergence where the S&P could not confirm new highs by the indicator. This was a tip that higher prices were ahead.

For a larger chart, please click here .

Chart created using TradeStation . ©TradeStation Technologies, 2001-2016. All rights reserved.

This indicator notwithstanding, the average stock fares well against the S&P. This is important because it is this relationship that will most often break down some months prior to a bull-market top. It is, therefore, a leading indicator of long-term proportions, discussed often in this column.

A major plus in the breadth department is the outperformance by micro-, small-, and medium-capitalization issues. Below is a chart of the outperforming small-stock Russell 2000 /zigman2/quotes/210598364/realtime NDX -2.75% , as shown in the chart below.

For a larger chart, please click here .

Chart created using TradeStation . ©TradeStation Technologies, 2001-2016. All rights reserved.

Among the names, Alibaba Group Holding /zigman2/quotes/201948298/composite BABA -5.93% is known as "the Amazon.com of China." Most Wall Street analysts believe the Hong Kong operator of digital marketplaces will grow earnings by 26% in the March 2017 fiscal year followed by 28% in the 2018 year.

Revenue growth has been bulky, with the last five quarters showing rates of 28%, 27%, 26%, 33% and 48%, respectively.

/zigman2/quotes/210598365/realtime
US : Nasdaq
13,768.92
-385.10 -2.72%
Volume: 5.00M
Jan. 21, 2022 4:06p
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
4,397.94
-84.79 -1.89%
Volume: 3.16B
Jan. 21, 2022 4:06p
loading...
/zigman2/quotes/210598364/realtime
US : U.S.: Nasdaq
14,438.40
-408.06 -2.75%
Volume: 1.22M
Jan. 21, 2022 4:06p
loading...
/zigman2/quotes/201948298/composite
US : U.S.: NYSE
$ 123.26
-7.77 -5.93%
Volume: 23.62M
Jan. 21, 2022 4:00p
P/E Ratio
17.97
Dividend Yield
N/A
Market Cap
$362.70 billion
Rev. per Employee
$497,763
loading...
Page 1 Page 2
This Story has 0 Comments
Be the first to comment
More News In
Trading Deck

Story Conversation

Commenting FAQs »

Like & Follow The Trading Deck

/conga/commentary/columnist-competition/looking.html 234011

Partner Center

Link to MarketWatch's Slice.