NDX: Two days ago, on the ramp, the Nasdaq/NYSE volume ratio spiked to about 1.57. This measure idnetifies speculation. The more Nasdaq volume relative to NYSE volume indicates the speculators are in the market.
This indicator has a great record at identifying tops in the NDX and COMPQ. and also marking intermediate tops as well.
Looking at charts, during 2003, in the initial phase on this bull cycle, this indicator signalled tops which resulted in a approx. 100 pt decline over time. Of course, these were only short term declines.
The January drop and the end of February drop in the NDX this year were correctly forecasted by this indicator which spike to around this area.
Even more impressive is its track record from 2004 on where it not only signalled short term tops but also intermediate tops. Looking at the charts, I don't think this indicator has failed to at least call a top if not an intermeiate top since this run began in 2003.
These spikes are not frequent.
Intermediate term tops are marked by a copule or clusters of spikes.
In 2005, a series of these spike to about the 1.50 range during March (I count 3) led to the decline into the July bottom.
Now if things come in threes, I find it interesting that we have had three spikes in this reading this year, the first two at NDX 1850 and this last one a little higher at 1880. All spike were similar in amplitude.
During the 2004 top, this indicator spiked twice in December in the same area to mark the 2004 top (over 1.7)into the May 2005 bottom.
A cluster of three spread out over months from December 2003 to July 2003 (that one was just shy of 1.50) spread over six months led to the August 2004 bottom. This top was not as clean as it was a top of declining highs.
Regardless, the short term impact of such readings should not be ignored as even in the strong bull run of 2003, this led to some problems.
Longer term, I will be interested to see how the NDX closes out this month.
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