Q: Arthur, why did you switch from the Nasdaq Composite to the Nasdaq 100 on the Market ChartTour?

A: The switch from the Nasdaq Composite to the Nasdaq 100 was based on two key reasons: price action and performance.

Just over the past few months there are five noticeable differences in the data:

• Gaps appear more often on the Nasdaq Composite, making the price data more erratic.
• Movements from open to close are smaller on the Nasdaq Composite (green arrows).
• The upper and lower shadows (intraday high and low) seem more logical on the Nasdaq 100 (red arrows).
• Around 24-Apr (blue arrow), the Nasdaq Composite formed two large gaps and a candlestick with a small white body (almost a doji). Over the same period, the Nasdaq 100 gapped down on the open and formed a candlestick with a small black body (hammer). An abandoned baby or morning star formed on the Nasdaq Composite while the Nasdaq 100 just showed a hammer.

The closing levels for both indices are accurate and not the problem. Were I just using closing prices, I would have no problem with Nasdaq data. However, the opening prices quoted for the Nasdaq 100 work better with candlesticks, which are dependent on the relationship of the open and close. If the open is out of whack, then the shape of the candlestick can change drastically.

The key stocks of the Nasdaq 100 dominate the Nasdaq Composite and more accurately reflect the Nasdaq's true drivers. The chart above shows how the Nasdaq Comp has vastly underperformed the Nasdaq 100 over the last several years. This price relative chart looks much like the AD Line, which also confirms the continued underperformance of the little stocks. It is similar to a comparison between the Nasdaq AD Line and the Nasdaq AD Volume Line. While the AD Line has been trending down for years, the AD Volume line broke down only 2 months ago.

I have not totally forgotten about the Nasdaq Composite though. The Nasdaq Composite chart is included in above the breadth statistics on the Market Chart Tour and I continue to draw lines for support, resistance and trend. Also, the volume totals for the Nasdaq Composite have been transferred to the Nasdaq 100 in order to calculate Chaikin Money Flow.

Cheers, Arthur Hill

Q: I can't for the life of me understand why you superimpose the daily bars over the volume bars in SharpCharts. It makes it impossible to read the volume bars.

A: To change the volume overlay settings, use the "Volume:" dropdown, just below the chart, and select "Separate" to see non-overlaid volume bars. You can then use the "Save the current settings as your default" link to make the change stick.

FWIW, overlaying the volume bars saves space on the screen for those people that like to know what volume is doing but who are not going to study it in depth.

Hope this helps,
Chip Anderson