Over the weekend, was able to dig further into the ramifications of a 9:1 down-to-up volume day on the NASDAQ. The most recent 9:1 down volume day on the NASDAQ occurred only one day following a three month NASDAQ price high. Therefore, I based the filtering for this study upon the following criteria:
1) Down volume exceeded up volume by at least a 9.00 to 1 ratio
2) Within seven trading days prior to the 9:1 down-to-up volume ratio, a new three month price high had been posted by the NASDAQ
I started out with a five day window for a new three month price high when the 9:1 down volume ratio occurred, but only had four qualifiers, so expanded to seven days and nine days met the requirements above.
Here are the results for NASDAQ percentage price returns at varying time intervals following the event:
As the table notes, average returns for all time windows were positive, however, the average returns returns were not stellar until 90 trading days later. The fonts for the worst draw downs are in red, the fonts for the best returns within a particular time frame are in green.
Also took a look at the NYSE using the same criteria, beginning in 1960. Over the past 46 years, the NYSE had 18 events meeting the criteria described above. Price returns following the NYSE events are that of the SPX.
Both the NASDAQ and NYSE tables have three rows highlighted with a greenish background, these are 9:1 down volume events that occurred on both exchanges. A drive-by analysis of those three days where both exchanges suffer 9:1 down volume ratios suggest more negative implications going forward in all time frames relative to 9:1 down volume events occurring on only one exchange.
Other than in 1979, a 9:1 down-to-up volume day following a recent new three month price high did not result in significant near term price damage in the NASDAQ.
Hope to study later the implications of the down volume ratio events that fell into certain time frames where multiple up-to-down volume ratios exceeding 9:1 transpired, as occurred earlier this summer. For those who want to check that out, there are a few threads providing the dates of the positive UD volume ratio events.