Interpreting The Nasdaq 100 Components: Directional Insights Into The Index

In the case of $NDX, there are 10 stocks that comprise a 56.38% weight within the Index; implying that the remaining 90 component stocks represent 43.62%. So, another piece into understanding the index activity may start at the level of classifying these influential components and there respective biases.

The top 10 components by weight: (from International Securities Exchange (ISE))
1.AAPL = 19%
2.MSFT = 8.24%
3.GOOG = 5.48%
4.ORCL = 5.00%
5.INTC = 4.30%
6.AMZN = 3.50%
7.QCOM  = 3.40%
8.CSCO = 2.84%
9.KFT = 2.34%
10.CMCSA = 2.28%
Total Weight = 56.38%


The screenshot below provides insight into the rotational quality associated with our components of interest as it relates to the 'type' of directional signal generated by each component. There are 2 signal types as per the columns below; 'CloseS' and 'IntraS'. These signals trigger new directional change on a short term basis (the basis of my Entry/Exit program). You can read more about how this develops here. I have tested these 2 signal types over large sample sizes and have determined their respective efficacies associated with trend development. This is an important finding because there are varying stages in the development or progression of trend. I am able to assign winning probabilities and levels of expectation depending on signal type, because these signal types tell us about the unfolding nature of the trend that is in development. The 2 signals are derived from inputs that analyze behavioral 'states' of the participants in the days auction process. 'IntraS' is an intraday generated signal and can be thought of as 'urgent' participation in the auction and forceful rotation associated with long liquidation and new short interest in the case of a 'short' signal or aggressive accumulation by larger participants along with short covering in the case of 'long' signal initiation . These behaviors have fundamentally different influences on price, or perceptions of price and correlate to statistically different outcomes as it relates to the quality of trend that may develop.. Statistically, my results show from large sample sizes that 'IntraS' rotation correlates with an increased  reliability of trend sustainable trend development. Whereas, 'CloseS' by its nature demonstrates less conviction from market participants but results in a directional change nonetheless.

From the screen shot above we can see the bias of the top 10 has already shifted into short trend (red highlights).Of the 10 components, 2 are net long but have been in long trends derived from 'CloseS' rotations, which are weaker demand rotations, as explained previously. Of the 8 short biases, 4 have been triggered by 'IntraS' or aggressive long liquidations and fresh short interest. When 80% of our 56.38% component weights are in short trends, and 50% of those have been initiated by quality rotations (IntraS), we have to be objectively skewed to the short side in our $NDX/$NQ bias.