Nasdaq Index Analysis

Over the last decade the Nasdaq composite index analysis has become equal to the NYSE index analysis in importance of analysis of the health of the United States economy and defining a sentiment on the US stock market.

 Nasdaq Composite index comprises stocks (public companies) that are traded on the Nasdaq exchange. Nasdaq exchange is the biggest over-the-counter stock market exchange in the world. More than three thousands stocks are traded on this electronic stock exchange. At the end of the twentieth century majority of the professional stock market analysts and big institutional investors were mainly focused on the analysis of the New York Stock Exchange (NYSE). At that time NYSE analysis was the main tool that allowed getting clear picture about stock market sentiment and the health of the United States economy. Now, the US stock market is split mainly between two biggest exchanges: NYSE exchange and Nasdaq Exchange. As a consequence, more and more professional stock market analysts are looking at the Nasdaq Composite index analysis as a necessary addition to the NYSE Composite index analysis in order to receive a complete picture of the US stock market.

Each exchange is characterized by the corresponding composite index. And each index like a stock has trend that describes this index. Nasdaq Exchange is not an exception. Nasdaq Composite index price trend movements describe this exchange sentiment. However, there is a substantial difference in technical analysis applied to an exchange and to a stock. When it comes to the technical analysis of the exchanges, there are four main parameters that are analyzed.

The same as with stock's technical analysis the first parameter that is analyzed is the price of the Nasdaq Composite index.

The second parameter that is analyzed is volume. However, while stock volume represents the volume of a single stock, in case of the exchange, the volume covers summary volume of all companies listed in the index. Such Nasdaq Composite index volume is the sum of volume of all stocks traded on the Nasdaq Exchange for a given period of time.

The third parameter is volatility. In similar ways to the stocks, the low volatility of the Nasdaq Composite index would indicate confidence and bullish sentiment of the traders on the stock market and high volatility of the Nasdaq Composite index would signal uncertainty and dominance of bearish sentiment on the Nasdaq stock market.

The last forth parameter that is used in the Nasdaq Composite index analysis is the number of advance and declines stocks as well as volume associated with advancing and declining stocks (advance/decline volume). Advance/decline (also called Breadth) indicators cannot be applied to a single stock, yet they are very important when it comes to the analysis of the indexes and exchanges.

 Image source: 123RF

Posted on February 10 2010 on the website Article Factory.

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Viktor Ka

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