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The Relationship Game



Late Friday afternoon. Everybody's stressed and worn out. Too tired to do any more reading, I always use Friday afternoons to go fishing for that relationship between two different data series (consumer confidence and employment, put/call and stocks, ticks versus stocks, etc.) that might help broaden my purview just a little bit more.

If Fleck is right about an important reversal today, I suspect that reversal will be led by the NDX, because that index was certainly the one that led us on the way up. So below you will see two charts, both of the same thing: the ratio of the NDX to the SPX over time. One is a longer time-frame, one is shorter, allowing you to see the latest squiggles.

Looking back a ways...

Source: Metastock

...And through a shorter time frame

Source: Metastock

What we know from today is that the NDX had a big reversal on substantial volume flows. In other words, it's reasonable to think that something important (more than one day action) has happened today to the trend. I'm not chartist and I do these things half as much for fun, but what this speaks to is that the NDX hasn't been able -- on a relative basis -- to eclipse the 1.245 area, and the index failed hard there today again.

All we can reasonably conclude from this is that this stock market's leadership index, the NDX, might be giving up its leadership status. The baton might be passed to another group or index. I don't know. But the price action in the index itself, combined with the graphs here, suggests that the NDX is losing its ability to lead the overall market.

The near future is likely to let us know what that means for stocks on a larger scale.

position in both the NDX and SPX

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