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Bullish Percent Charts

NASDAQ 100 Percent Above 10-Week Average

This chart, along with the NASDAQ 100 Bullish Percent Chart can be used to trade the NASDAQ 100 Index Trust (QQQ) – AMEX. This is purely a short-term indicator. We define short-term as 1 – 2 months, not day trading. This chart records the percent of stocks in the NASDAQ 100 that are above their 10-week moving average. Because the number of issues in this universe is smaller than any of the other Percent Above 10-Week Average charts we use, it tends to move the fastest and go to more extremes than the others.

To calculate a 10-week moving average you would add up the weekly closing prices for a stock for the last 10 weeks and divide it by ten. For example, if a stocks closing price for each of the last 10 weeks was $45.50, $51.24, $50.91, $48.73, $51.12, $50.52, $47.98, $46.76, $43.85 and $41.98, it adds up to $478.59. Divide this number by 10 and the result is $47.859. That is the 10-Week Average price for the stock. At the end of the next week you would drop off the oldest week and replace it with the recent week. Let’s say it closed the next week at $44.48. We would replace the $41.98 with the new close of $44.48. The new total would be $481.09 making the ten week moving average $48.109.

If the last week’s closing price is above the 10 week average, then it counts as one stock that is above the 10-week moving average. If more stocks are above their 10-week moving averages, the short-term momentum of the market is up. If more are below their 10-week moving average, the short-term momentum of the market is down.

Important buy signals develop on this chart when the percentage above their 10-week average drops below 30% then begins moving higher. This indicates that a lot of stocks on the NASDAQ 100 index have declined below their 10-week average and are now beginning to move above it changing the momentum of this index from down to up. At these times, short-term investors should take aggressive positions in the QQQ’s to profit from an advancing overall market.

Important sell signals develop on this chart when the percentage above their 10-week average rises above 70% then begins moving lower. This indicates that a lot of stocks in the NASDAQ 100 index have advanced above their 10-week average and are now beginning to fall below it changing the momentum of the this index from up to down. At these times, short-term investors should sell their positions in the QQQ’s. Those so inclined, can sell short the QQQ’s to profit from the expected decline in this index.

This chart is recorded and interpreted the same way as the other bullish percent charts.

There are two levels of analysis on this chart.

Direction
Position

DIRECTION

A rising percentage is recorded with Xs
Xs indicate more issues rising above their 10-week averages in the NASDAQ 100 index
Your short-term approach toward the NASDAQ 100 is aggressive, attempting to grow your portfolio
A declining percentage is recorded with Os
Os indicate more issues dropping below their 10-week averages in the NASDAQ 100 index
Our short-term approach toward the NASDAQ 100 is defensive, protecting your portfolio

POSITION

Extremes readings are 70% and 30%
Reversals from the extreme levels indicate short-term turning points for the NASDAQ 100 index
70% indicates on a short-term basis there is a high-risk level for the NASDAQ 100 index
A reversal down from 70% is a short-term sell signal for the NASDAQ 100 index
Short-term investors should manage their portfolios defensively in this market (risk management)
Aggressive investors should apply a short selling strategy to profit from the expected decline in the NASDAQ 100 index.
30% indicates the short-term risk level is low for the NASDAQ 100 index
A reversal up from below 30% is a short-term buy signal for the NASDAQ 100 index
Short-term investors should manage their portfolios aggressively in this market
Any short sales should be covered in the NASDAQ100 index

Investors should use this indicator in conjunction with the NASDAQ BP Chart to get an accurate assessment of the short-term direction of the NASDAQ 100 index. When both of these indicators are providing similar indications, trading in the QQQ’s can be profitable.