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Buzz & Banter


One of the more interesting and useful functions on Bloomberg is the custom index function; it allows you to create a custom index of, say, a basket of stocks, multiple indices, or ratios between indices or stocks. CXI is the function if you are in front of a Bloomberg now.

Based on the assumption that the Nasdaq has been, for the better part of the last decade at least, a leader both to the upside and downside in major moves, we created a custom index of the Nasdaq Composite divided by the NYSE index, and looked at the 100 day moving average of that ratio's data series. Interestingly, on 10/18/02 the index itself crossed above its 100 day moving average, kicking off a blistering bull run off the October 10th lows. And that 100 day moving average support has held three different times when the market swooned since: April, August, and late November of 2003. I have been watching it closely over the last few days because it, again, was right at its support.

Today's price action, however, shows that index crossing under its 100 day moving average decisively for the first time since 2/7/02. Given the Nasdaq's "leading" qualities, this ratio, and its moving average, bears watching. Add it to your palette.

ps - Reproducing the graph is very difficult and time consuming, so if you don't have a Bloomberg to create it yourself, ping me with an email and I will send you a screen shot of the graph.
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No positions in stocks mentioned.

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