The charts are showing stocks are close to breaking out of their ultra-tight range
If I told you 176 calendar days ago, just after Labor Day, that the U.S. would capture the leader of Venezuela, seize a few million barrels of oil, the Middle East would erupt into a war that eliminated much of Iran’s leadership, crude oil spikes above $120, and June rate cut is mostly off the table — would you believe the stock market would be trading at the same price on St. Patrick’s Day 2026? Neither would I. But here we are. The chart below shows the Nasdaq-100 daily chart stuck in a fairly tight trading range of 9% from high to low. To make matters worse, right after Groundhog Day, the darned rodent saw his shadow, forecasting six more weeks of winter and possibly more market range? Well, that six weeks of winter and market range are up. Is it time for the weather — and the markets — to thaw out? To answer that question let’s pop the market hood and look at the internals to see if there is movement below the index surface that points to a range resolution. The following five charts will show you divergences of the internals of the market compared to the price of a stock index to suggest we might have seen the lows and and range resolution is coming. Basically what you’re looking for is non-confirmation of the indicator that makes a higher-low compared to the price of the index that makes a lower-low. Let’s start with the Nasdaq TICK indicator. The TICK indicator is a real-time breadth study that measures the amount of upticking stocks versus downticking name that very minute. It detects the presence of institutional program trades. When the big institutions want to buy a whole index or sector group, they will often program trade and simply hit the buy button to accumulate all S & P 500 stocks or some other group of stocks. That will make the TICK indicator spike leaving a clear footprint. The same is true with a program sell trades when they want to dump a basket of stocks. The chart below shows the Nasdaq TICK in the light blue and gray. To make sense and smooth it out I’ve created a 20-period moving average (red) that we’ll compare against the Nasdaq 100. Notice that the Nasdaq 100 has been making slight lower-lows since Feb. 5 while the moving average of TICK has been making equal lows and most recently a higher low? This is TICK non-confirmation of the new lows set on March 13. Put simply, institutional sell programs are drying up. Most of those who want to sell have likely already done so. Same deal with New York Stock Exchange TICK reading. We’re now making a higher-low in NYSE TICK compared to the S & P 500 that has been making lower-lows. Next we’ll assess the put-to-call ratio also with a 20-period moving average to smooth out the reading and make a comparison to the S & P 500 simpler. The red dashed line shows the moving average of put/call ratio has made a double top as the S & P 500 index price makes lower-lows. Not labeled, but the moving average made a significantly lower-high compared to the first week in March, again as S & P made a lower-low. This means fearful option hedgers are not buying as many puts as they were in February and early March. Next is the difference of advancing stocks vs declining stocks on an hourly closing basis. In March, the S & P 500 has made two lower-lows, yet advance/decline has made three higher-lows as the moving average of the indicator made the first higher-low. This is non-confirmation of lower-lows in the S & P 500 indicating selling pressure across a broad spectrum of stocks is drying up. The final chart is the S & P 500 with the ratio of advancing stocks to declining stocks. Notice this is the ratio while the above chart is the difference. When the indicator moves to the low-end at 0.40 or below the ratio of declining stocks is greater than the advancing, and vice versa above 0.60. Many market watchers are citing a popular market signal from legendary investor Marty Zweig called the Zweig Breadth Thrust. This triggers when the ratio goes from deeply oversold at below 0.40 to overbought for a reading of 0.610 within 10 trading days. It detects significant stock buying — both shorts covering and new buyers coming to markets — that suggests positive stock returns in coming months. Since the 1940s, this has triggered less than 20 times, the last two labeled with red arrows on the charts, leading to a higher stock market 6 months from now 90% of the time. To trigger a ZBT we need to see the indicator above 0.61 on March 27, and we’ll use the other indicators above to identify sustained buying power. Maybe in the spring we’ll look back and say it wasn’t a joke to call a market low around April fools day? —Todd Gordon, Founder of Inside Edge Capital, LLC We offer active portfolio management and financial planning for retail investors, as well as regular market updates at www.InsideEdgeCapital.com DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
<
