The Stock Market has been on a tear since the lows on the 23/03/2020.
What happened on the same day? The Fed announced QE Infinity.
Simple coincidence? I guess not.
Technology companies have been outperforming the market with some big moves across the Technology Sector.
The Nasdaq Composite is up 1.7% for 2020 and is only 7.3% below its All Time High (ATH).
Yesterday I read a tweet about the Nasdaq Composite dispersion versus its Moving Average 50 days. So I did a bit of work for the last 30 years.
On the 20th of March 2020, the Nasdaq Composite closed 22.9% below its MA 50.
On the 23rd of March 2020, the S&P 500 closed 27.7% below its MA 50.
At last Friday’s close (08/05/2020), the Nasdaq composite closed 12.1% above its MA50 and the S&P 500 7.3% above.
Last time we had the Nasdaq closing 12% above its MA50 as in April/May 2009 with 10 sessions. Before that, you have to go back to the 2000-2002 period or the “Nasdaq bubble”.
That translates into the following graphs:
In terms of statistics or distribution for the occurrences of closing price vs MA 50 , you end up with this for the Nasdaq Composite:
Since 1990, we only had 164 occurrences where the Nasdaq Composite closed more than 12.1% it Moving Average 50 days, or less than 2.2% of the time.
We went in seven weeks from one extreme to another.
In the chart above, the Nasdaq Composite with in Green MA 20, Red MA 50, Yellow 200.
For sure, after this big sell-off and with the recent upmove, the MA 50 will now go up.
That is a serious move from one tail to another. But as always, that does not mean this dispersion could go wider. In other words, that is not just telling us we should be selling here but an indication that vs the odds that is an extended move.
I hope it helps,