We will use the NDFI index to look at historical peaks of max bearishness to gauge where we might see a bounce in tech names. Currently, the NDFI is giving us a reading of roughly ~15% of the NDX stocks are about their 50d moving average. Interesting enough, the reading was closer to ~14% at the end of last week, a very slight improvement. I have identified historical areas on the NDFI to indicate where the NDX bottomed and had a subsequent reversal going back to April 2018. During this timeframe the reading got as low at 1% of stocks were above the 50dma. Below I have listed the dates, the reading and the percent move that occurred after the bottom at specific dates.
4/2/2018 9% reading with a subsequent rebound of 19%
12/17/2018 3% reading with a subsequent rebound of 20%
3/16/2020 1% reading with a subsequent rebound of 138%
6/13/2022 6% reading with a subsequent rebound of 20%
9/19/2022 3% reading with a subsequent rebound of 47%
4/07/2025 6.5% reading with a subsequent rebound of 50%
No one can predict when the bottom will occur. The only clue I can give for capitulation in the market is the VIX and the state of the strongest stocks in the market. VIX needs to get back below $22, so not there yet. Normally the market sells off stocks that it sees as risky first, I think we are there, then they go after the high quality stocks that no one wants to sell because they have to. The MAGS have been selling down for sometime already. XLF has already been under pressure and they went after the SOXX names aggressively today. I don’t know what is left. We should be getting close to a bottom, but you just never know.