Monday, February 06, 2006

Narrow, Slow Days In the QQQQ

Monday was a slow day in the market, with the NASDAQ 100 (QQQQ) Index moving in a roughly 1% range--about 2/3 the norm. The QQQQ also traded at about 70% of its average volume over the past 60 days, closing down .22% from open to close. I decided to take a look at slow, narrow days in QQQQ by going back to March, 2003 (N = 737) and investigating days in which the range was less than 1.2% and volume was 80% of the 60 day average or less. This provided a sample of 105 occasions.

As we might expect, the next day in QQQQ also tends to be slow. Fully 76 of the 105 occasions were below average in volume. This tended to produce reduced trading ranges; 74 of the occasions were below average in trading range.

Interestingly, when the narrow, slow day was down (N = 42), the market fared better the next day (average gain = .14%; 26 up, 16 down) than if the narrow slow day was up (N = 63; average loss = -.03%; 27 up, 36 down).

In short, narrow slowness tends to carry over to the next day for QQQQ, but price movement on the narrow slow day tends to reverse the following day.