The Nasdaq-100 Just Did This for the First Time in 3 Years

One in five Nasdaq-100 components made a buying climax last week

Jun 14, 2017 at 12:37 PM
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Last Friday, June 9, tech stocks took an unexpected turn for the worse in afternoon trading, triggering the start of a two-day sell-off and a run on PowerShares QQQ Trust (QQQ) options. As such, more than a handful of tech stocks made a "buying climax" -- when a stock hits an annual high during the week, only to end the week lower. ln fact, of the Nasdaq-100 Index (NDX) stocks that trade above $100, 21% made a buying climax last week -- the most in three years, according to data from Schaeffer's Quantitative Analyst Chris Prybal.

Nasdaq 100 buying climax with QQQ

Specifically, you'd have to go back to June 13, 2014 to find a higher buying climax with this data set. The last time we saw at least 20% of these stocks make a buying climax was in late February 2015. There were no buying climaxes of this magnitude in 2016, Prybal's data indicates.

Following previous "signals," the Nasdaq-100 has underperformed over the short term. One week after a signal, for instance, the NDX was down 0.8%, on average, going back to 2005. Plus, the index was in the black just 38.5% of the time. That's compared to an anytime one-week gain of 0.2% for the NDX, with a win rate of 58%. The NDX averages a loss, in fact, at the two- and four-week markers, too, following past signals. So, it's safe to say that selling tends to beget selling for the Nasdaq-100, at least in the short term.

The "sweet spot," so to speak, after previous NDX signals has been the three-month marker. The index was up a slightly better-than-usual 2.7%, on average, and was higher more than three-quarters of the time. That's compared to an anytime three-month gain of 2.5%, with a win rate of 70%.

Six months and a year after these spikes in buying climaxes, the NDX's returns are lackluster compared to anytime returns, though the index does boast a one-year win rate of 92.3%. In fact, the last buying climax of more than 20%, back in February 2015, was the only one that preceded a negative year-over-year run, breaking the trend.

Nasdaq 100 NDX buying climax

Nasdaq 100 buying climax NDX


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