Nasdaq Relative Volume Surges
Volume will probably pick up as earnings reports
start to roll out, but for now it remains depressed.
That makes it easier to see distortions, and we're
getting one of those now, as turnover on the
Nasdaq exchange has been 2.5 times greater than that on the NYSE for the
past two days.
The traditional interpretation is that Nasdaq
stocks are speculative compared to the more staid stocks listed on the NYSE, so
when Nasdaq volume is high compared to NYSE volume, it's a sign that traders are
overly frothy.
Click chart for larger view
This is a minor indicator, but it still has a
decent track record. And as we can see from the chart, when the ratio has
been this stretched, stocks have usually struggled.
First Day Of Earnings Season
Today marks the first day of earnings season.
We looked at individual stocks' Sentiment Scores in a
Data Brief earlier this afternoon for those companies reporting during the
next four weeks.
As happens every quarter, people try to
extrapolate what happens on the first day to the rest of the season. We've
looked at this many times before, but...
When the S&P 500 declined the day after
earnings season begins, then the rest of the reason showed a positive return 59%
of the time, averaging +1.2%. Its risk (i.e. maximum loss) averaged -3.1%
while its reward (i.e. maximum gain) averaged +3.3%.
When the S&P rose on the first day, then
the rest of the season was positive only 38% of the time, averaging -0.7%.
Its risk averaged -4.5% while its reward averaged +2.2%, less than half the
average risk.
So stocks actually performed better the rest of
the season when it declined the first day, at least since 1998 when we have a
more accurate accounting of when earning season began and ended.
Whatever happens on the first day, the earnings
reports that start in January have led to a down market more often than not
since 1998, which is no surprise given the other seasonality stats we've
discussed.
The earnings reports that begin in July have led
to even worse performance, while the October releases have led to the best.
