Thin NASDAQ Leadership Better Called Pathetic ~ The Risk Averse Alert

Wednesday, January 20, 2010

Thin NASDAQ Leadership Better Called Pathetic

Continuing with yesterday's analysis of the poor state of leadership lifting the stock market higher off March '09 lows, a few additional things are worth noting.

Having revealed how, starting October '09 ... once the NYSE Composite finally was trading higher than a year earlier ... the number of NYSE-listed issues reaching new 52-week highs did not at all expand by any significant degree, one might think my calling the market's leadership "thin" but an arbitrary characterization coming from a bona fide bear. So, let's put a number to it...

There are 3866 listed issues on the NYSE. Over the past few months since mid-October 2009 — a duration over which the NYSE Composite Index consistently has traded at or near its highs for the prior 52 weeks — the 50-day moving average of the NYSE new 52-week high-low differential has ranged in the vicinity of ballpark 150 - 200. Taking today's 50-day moving average of 204 and dividing this by 3866 NYSE issues, we come up with slightly more than 5% of NYSE-listed issues leading the charge higher.

That's thin.

While we're at it, let's take a look at the same situation on NASDAQ, because, no surprise, leadership is nyet...


As you can see, unlike the NYSE's new 52-week high-low differential, NASDAQ's has yet to exceed its October peak. Thus, once again, failed leadership is revealed under the covers on the Pump & Dump.

But wait. There's more...

Taking today's 50-day moving average of NASDAQ's new 52-week high-low differential (95) and dividing this by the number of NASDAQ-listed issues (2740), we come up with a grand total of 3.5% of NASDAQ issues, on average, leading the charge higher. There's a word for this so-called "tech leadership" you hear so many analysts proclaiming...


Now, per this matter of thin leadership, you might wonder what's the big deal in the grand scheme of things? What does it matter?

Quite simply thin leadership reflects AWOL animal spirits necessary to sustain the market's advance off March '09 bottom. But one more sign all things are not what they seem...

Fast Money
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