Persisting NYSE v. NASDAQ Disparity ~ The Risk Averse Alert

Friday, August 24, 2012

Persisting NYSE v. NASDAQ Disparity

Stepping back and taking in the big picture for a view on dead animal spirits, a magnificent ruse, and the depth of troubles likely in store, the NYSE v. NASDAQ Composite contrast provides considerable evidence that, these points of view are true. Now, we have been down this avenue of inquiry a few times before. Still, the evidence has grown but more conclusive, so reiterating its meaning not only remains relevant, but yet further confirms the case for maintaining an extraordinarily dire outlook.

NYSE weekly

What's most astounding about the NYSE Composite's performance off March '09 bottom is fathomed in relation to the NYSE's cumulative advance-decline line. It was in December 2009 that, the NYSE's cumulative advance-decline line exceeded its peak of 2007. Furthermore, the advance-decline line has persistently risen ever since. Yet look how badly the NYSE Composite Index is lagging. Indeed, this disparity has only grown worse.

That's count number one supporting a magnificent ruse. When I first identified this circumstance a couple years ago my explanation suggested NYSE-listed issues by and large were pounded in dollar increments on the way down and bid up in penny increments on the way back up. There is every reason to maintain this view.

NASDAQ weekly

Count number two supporting a magnificent ruse is delivered by way of the NASDAQ Composite. By all appearances the NYSE's little brother is leading the market higher, and this on the surface gives the impression that, animal spirits are expanding, as they should were the market thought in the midst of a sustained advance. When NASDAQ outshines the NYSE the conclusion you come away with is that, animal spirits are flourishing.

However, under the covers NASDAQ in fact is one sick puppy. This is revealed by NASDAQ's cumulative advance-decline line remaining in a death spiral, a point of fact brought to your attention exactly one week ago in "NASDEATH and Other Pigs for Slaughter." Like I said then, the true underlying state of affairs on NASDAQ rather is conducive to a bloodbath once the handful of darlings propping up the composite index are loved no longer.

Taking in the big picture contrasting the NYSE and NASDAQ, and comparing this with a similar relative price performance displayed in the August 2008 period, there is every reason to suspect the worst, indeed, is pending, and will likely hit sometime in the not-too-distant future. Although this NYSE v. NASDAQ performance disparity has been persisting for quite some time, ignoring its ominous portent will no less likely prove a fatal mistake. Quite the opposite to be sure.

Fast Money
* * * * *

© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.

There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!