What the SOX is Suggesting About the Short-Term Direction of the NDX

One interesting aspect of Monday’s trading was the discrepancy between the NDX and the SOX. While the NDX rose 1.1% on Monday, the SOX declined slightly – which is unusual action. Typically, such action has been followed by weakness in the NDX. This is demonstrated by a study last seen in the 9/9/10 Subscriber Letter, which I have updated below.

Six days out 78% of the instances were losers and the average occurrence was nearly a 3% loss. That seems to be a fairly substantial edge.