DOW: Interim term buy based on RSI(2) and higher highs in overbought conditions

Running similar studies as i did on the Nasdaq, but this time on the DOW, reveals the following.

The DOW is up 8 straight days. The short term is not as bullish as what the nasdaq revealed. For instance from 1965 to to 1995, the dow went on to close higher within 3 days in 16 of 18 occurrences, which ofcourse are excellent odds. But if we focus on recent history, say the last 2 decades, we see that in only 8 out of 13 occurrences did the dow close higher within 3 days. Looking out 10 days, or two weeks, still has favorable odds however. In the last two decades, the dow closed higher 11 out of 13 occurrences.

The RSI is also telling a similar story. When the RSI(2) has closed above 98 for 5 consecutive days on the DOW (as it did yesteray), the DOW has closed up 17 out 22 (or 77%) of the time. 20 days out, or 4 weeks later, the win ratio is still good at 16/22.

These types of data seem to suggest that we should be nibbling long on any short term pull back, rather than...well, think too logically and move to cash? not saying that is bad thing - but based on what this data suggests, there are still some rather favorable trades here on the long side.

Nasdaq: Short Term and Intermediate term buy

Last night I pointed out conflicting studies. The Nasdaq 100 closing up 10 consecutive days argued for a close higher in the ST, while the DIA streak as well as BKX divergence with the S&P argued for a lower close on the NYSE and S&P. The markets today followed those expectations, with the S&P and NYSE closing down, while the nasdaq closed up.

With the NASDAQ 100 and the NASDAQ composite having closed up for the 11th consecutive day today, i thought it would be worth to look at historical performances of the composite after such occurrences. There have been 20 prior instances where the NASDAQ composite has closed up for 11 consecutive days. As you can see from the table below, in 18 out of the 20 (90%) cases the NASDAQ was trading higher at some point in the next 3 days. Also notable, is that the market was trading higher 18 out 20 (90%) of the time 4 weeks later.

Ticker	Date/Time	Streak	Close	PctChg N1	PctChg N2	PctChg N3	PctChg N10	PctChg N20
^IXIC	3/9/1971	11	104.41	-0.26	-0.14	0.09	0.67	3.02
^IXIC	4/12/1971	11	108.87	-0.02	0.19	0.75	2.08	1.18
^IXIC	12/14/1976	11	94.65	0.29	0.30	-0.01	1.73	1.45
^IXIC	11/18/1977	11	102.22	0.13	0.69	1.49	1.89	1.06
^IXIC	6/9/1978	11	124.41	-0.10	-0.14	0.08	-2.95	-4.04
^IXIC	8/8/1978	11	130.49	0.88	0.84	1.16	2.59	4.59
^IXIC	6/14/1979	11	136.02	0.17	-0.12	0.02	1.51	1.84
^IXIC	8/21/1979	11	147.99	0.51	0.77	0.95	-1.32	0.98
^IXIC	6/18/1980	11	157.19	-0.29	-0.43	-0.13	1.27	7.30
^IXIC	10/14/1980	11	199.02	0.21	-0.54	-0.89	-2.64	-0.62
^IXIC	1/22/1985	11	268.40	0.86	1.45	2.09	5.29	7.04
^IXIC	11/12/1985	11	304.40	-0.16	0.26	0.59	2.00	4.76
^IXIC	2/14/1986	11	350.20	0.63	0.54	0.83	2.74	5.65
^IXIC	1/15/1987	11	392.60	-0.69	0.00	-0.13	-0.41	4.23
^IXIC	6/17/1987	11	428.40	0.14	0.16	0.21	-0.91	1.12
^IXIC	2/24/1988	11	363.10	0.14	0.08	1.07	4.74	4.68
^IXIC	5/24/1990	11	458.30	-1.00	-0.17	0.11	0.57	0.22
^IXIC	2/6/1991	11	439.20	-0.96	-0.55	1.12	1.64	8.32
^IXIC	1/7/1992	11	602.29	1.33	2.91	2.23	0.43	4.77
^IXIC	9/20/1996	11	1,219.69	-0.67	-0.36	0.41	2.29	1.87
^IXIC	7/22/2009	11	1,926.38	0.00	0.00	0.00	0.00	0.00

This suggests that any dip over the next few days could result in a buying opportunity.