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<\/p>\nBy Greg Peel<\/p>\n
Jason Goepfert of sentimenTrader.com (as republished for DailyWealth) would like you to note that the Nasdaq Composite Index has hit a new 52-week low for the first time in three years. History shows, Jason informs us, that a substantial rally may well follow.<\/p>\n
The story goes like this:<\/p>\n
In the 35 years of the Nasdaq Composite Index, a new 52-week low has only been established, after three years or more, on four occasions.<\/p>\n
(Bear in mind that a 52-week low is a moveable feast, not a January to December proposition. It means a low any time in the last 52 weeks. When you look at the accompanying graph, you’ll see that other lows have been established, but a previously lower low has always been hit within the 52 week period.)<\/p>\n
<\/p>\n
Each time the Nasdaq has run three years without a new 52-week low, and then hit one, the index has subsequently rallied. In 1980 it rallied 58%, in 1987 (post crash) 7%, in 1994 33%, and in 1998 68%.<\/p>\n
When the new low is established the first thing that usually happens is panic from the bears. A breach of such a support point often spells danger. However, Goepfert notes that although a panic sell-off may occur to an even lower low, in the four occasions above the turnaround has provided extraordinary profit opportunities.<\/p>\n
Of course a lot comes down to knowing just when a low has been established, and knowing when the rally has really started, but you get the drift.<\/p>\n
To add a bit of spice to the mix, Goepfort also points out that last Friday only 6% of the components in the Nasdaq 100 closed above their respective 10-day average, and only 10% closed above their 50-day. This might look really doomsday-ish, but in the nine times such a "washout", as Goepfort calls it, has occurred in the last decade the Nasdaq 100 was higher three months later by an average of 30%.<\/p>\n
Is this enough of a precedent to make a call? Goepfort is not suggesting you put your house on it. But then contrarian traders do often make the best returns.<\/p>\n
The Nasdaq Composite bounced off the low and rallied 1.83% last night. But before you call your US broker, Goepfort acknowledges that war and a wobbly tech reporting season will no doubt provide volatility in the shorter term. As to when the low will be cemented is not yet clear.<\/p>\n
Good luck to all. We now return you to regular programming.<\/p>\n","protected":false},"excerpt":{"rendered":"
Here’s one for the tech-lovers, technical analysts and tea leaf readers.<\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5],"tags":[],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/52032"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=52032"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/52032\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=52032"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=52032"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=52032"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}