More than 20% of NDX components over $100 made a buying climax last week
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.
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.
