Nasdaq/NYSE Volume Ratio Hitting Extreme Levels

The Nasdaq/NYSE Volume Ratio is an indicator I haven’t discussed on the blog, and not too often in the Subscriber Letter. It is hitting extreme levels at this time and deserves some attention. One word of caution – levels will vary depending on data provider. So while the extremes may differ depending on whose data you use, results should be comparable at those extremes. I use Tradestation. On Tuesday the Nasdaq/NYSE volume 20-day average closed over 1.65. Below is a table showing 1-month returns based on this ratio.

Nasdaq / NYSE 20-day volume ratio exceeds X. Buy S&P 500 on close. Sell 20-days later. $100k/trade. (click to enlarge)

High levels of Nasdaq trading as opposed to NYSE suggest excessive speculation by investors. Once this level exceeds 1.4 (as Tradestation measures it), is has generally indicated a bearish bias.