Until Further Notice It's A Nasdaq Show

May 23, 2016 | Taylor Letterman

I love when the NASDAQ (NDX) leads. So you want to sell in May and Go Away? NDX in May is 21 points higher (+0.48%). In a month which is historically bad for the stock market, NDX is defying the odds and headed higher. NDX is telling me to close my eyes and get long while everyone else is short.


                                 04/29/16                      05/20/16                         CHANGE

DJX                           17773                          17500                       -273 (-1.53%)

SPX                            2065                             2052                         -13 (-0.62%)

NDX                           4341                             4362                        +21 (+0.48%)

RUX                           1130                             1110                         -20 (-1.76%)

Year-to-date, NDX is getting creamed, but I’ve seen this sector do crazier things in years past like rally for 10-11 consecutive days in a row. Someone is buying NDX in May. For the first time this year, NDX has taken up the leadership role higher…just the way I like it.


                                 12/31/15                      05/20/16                          CHANGE

DJX                           17452                          17500                           +48 (+0.27%)

SPX                            2043                             2052                            +9 (+0.44%)

NDX                           4593                             4362                          -231 (-5.02%)

RUX                           1135                             1110                            -25 (-2.20%)

Look at how NDX in 2016 had led the indexes lower and lagged behind the other indexes when the market bounced.  All of a sudden NDX is the only index trading higher in the month of May when everyone else has sold it and walked away. “Sell in May and Walk Away.”  My recommendation to the shorts is; don’t walk too far away. I am looking for the summer rally of all summer rallies.


                JANUARY              FEBRUARY             MARCH                   APRIL 

                 CHANGE                CHANGE                CHANGE               CHANGE

DJX       -986 (-5.46%)         +50 (+0.30%)         +1169 (+7.07%)        +88 (+0.49%)

SPX       -103 (-5.04%)            -8 (-0.41%)            +127 (+6.57%)          +7 (+0.03%)

NDX      -314 (-6.83%)          -78 (-1.82%)            +282 (+6.71%)       -142 (-3.16%)

RUX      -100 (-8.81%)            -2 (-0.19%)              +81 (+7.84%)        +16 (+1.43%) 

The three monthly charts posted below tell the long-term story. We are in the early stages of the next leg higher led by the NASDAQ. If the story being told to me is correct, this NASDAQ will be leading the stock market higher for the next 5-6 years.

Please remember; market bottoms can also be built on short-covering and there are a lot of damn shorts and even more bears in the market as we speak. There are many who think the stock market will crash but no one thinks the Dow Jones Industrial Average could trade 25,000.

Speaking of the word “crash” and how it relates to stock markets. I am reminded of a phrase taught to me years ago. When the butcher, the baker and the candle stick maker get long, then the market can crash. Guess what sports fans? They are all short. The only crash we are going to see is the indexes around the world crashing through their old highs and trading at new all-time highs very soon.

The daily NDX chart posted below has a possible Double Bottom in place. A Double Bottom is a Reversal Pattern. If NDX trades above 4408, I will look for a summer rally to beat all other summer rallies.





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