The Nasdaq-100 Index (NDX) experienced a 'big' -2.2% decline on Thursday, 'trending' lower on the day to finish at 1777.89. As a result of the move, NDX crossed below its 50-day average after crossing above that average on Monday of this week. NDX remains in a longer term bearish trend as it is currently trading below its 200- and 100-day averages. Where should traders expect NDX to move from here?
Q: How has NDX performed in the past when, while trading below its 200-day average, it experiences a 'trend day'* decline resulting in crossing below its 50-day average?
* A trend day down is when the days open is in the upper 20% of the day's high-low range while the close is in the lower 20%.
A: According to the seven previous occurrences of this event, omitting repeat occurrences within 10 trading days, NDX has shown a strong bearish edge that peaks one trading day after the event. Thus, the projected date for the peak of the bearish edge relative to the current event date (Thursday, March 27, 2008) is Friday, March 28, 2008.
NDX declines in 100% of the cases (7 of 7) by an average of -1.8% relative to the close on the event date. The overall return of the seven cases is -1.8%, which, based on the close of NDX on the event date (1777.89), provides a target price of 1745.89.
To view a close representation of this event in EventEdge, click here. This is a one-day bearish peak, and is not inconsistent with bullish postings on the NASDAQ earlier in the week.
If you would like to see more details of this historical edge, go to www.markethistory.com
HYPERLINK "http://www.markethistory.com/staff/detail.html?s=rsoudan" Ryan Soudan is an analyst with MarketHistory.com.
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