The response to my last column, which warned of an ominous pattern in charts of big technology stocks, shows that while professionals are hedged against a decline, the average investor is full of bravado.

The real question

The real question for investors is what comes next — bloodbath or bliss. To find the answer, we need to take the equivalent of an X-ray of the U.S. stock market. At The Arora Report, to do the X-ray, we mostly depend on the ZYX Global Multi-Asset Allocation Model. This is an adaptive model — it changes along with market conditions. The algorithms used in the model involve a large number of macro, fundamental, quantitative and technical indicators. Today I am going to expose readers to a technical indicator that is of special note at this time about big tech stocks. On Friday I wrote: “Pay attention to the ominous pattern in big technology stocks.”

The most useful indicator

To see this indicator, please click here for an annotated chart.

The chart shows the difference between advancing and declining issues of the Nasdaq 100 index NDX.  The popular ETF that represents Nasdaq 100 is QQQ.  The index contains popular technology stocks such as Apple AAPL,  Facebook FB and Nvidia NVDA.

Here are my observations from the annotated chart.

• The top pane shows candlesticks for the difference between advancing and declining issues among Nasdaq 100 stocks.

• Traditionally, only the closing value is used as an input into further studies. In my three decades-plus in the markets, I have concluded that the traditional way often gives misleading results…Read more at MarketWatch


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