Still room for upside in the Nasdaq

I was back messing about with the ratio of Nasdaq stocks above their 200-day MA relative to those over their 50-day MA. This picture tells a different story from the precarious nature the daily charts give. Unlike many indicators, market reversals don't occur at peaks and troughs in this ratio, but instead occur in a middle band where the direction of entry of the ratio (from above or below) dictates whether the Nasdaq will make a bottom or top.

The three bands marked represent reversal zones for tops (red) and bottoms (green) with the mid-band (blue) showing where these two levels overlap. It is clear this ratio is well inside bottom territory and isn't close to challenging the blue mid-band which frequently marks the level at which the Nasdaq peaks. Sizable divergences occur at ratio highs and lows, but these offer little practical use.

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Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, market alerts and stock charts website