INDICATOR INSIGHTS
The NCFD
As introduced in Chapter 3 of our publication When to Buy and When to Sell: Combining Easy Indicators, Charts, and Financial Astrology (available on Amazon), there are several “leading indicators” that go largely unnoticed and under-utilized by the average beginner or intermediate investor. We routinely cover those that measure human emotion and market sentiment, as well as technical charts that often determine shorter term price action.
Another “under the radar” economic indicator that often sways the short-term sentiment of institutional traders and investors is the Net Change in Forward Demand (NCFD), considered a leading indicator, as it captures institutional sentiment, rather than retails and news driven noise. This indicator focuses on the percentage of Nasdaq stocks above the 5-day average, and can be found on the Trading View platform, which displays real‑time YTD, MTD, and DTD net price changes for a given instrument.
The NCFD indicator, specifically, is a specialized market‑breadth metric used by some quantitative and macro‑focused traders to track shifts in positioning across forward‑dated (futures) contracts. Because forward markets often move ahead of spot markets, NCFD is designed to capture early changes in sentiment, liquidity, and hedging pressure that may foreshadow broader price action.
At its core, NCFD quantifies how much demand for forward exposure has increased or decreased over a given period. Traders typically calculate it using changes in the following:
Forward open options interest — Notional value of outstanding forward contracts
Forward volume — Trading activity in forward‑dated instruments
Directional positioning — Net long vs. net short exposure
A positive NCFD reading means traders are adding forward exposure; a negative reading means they are unwinding or reducing it. Because futures contracts reflect expectations about future price levels, changes in demand often reveal shifts in institutional sentiment before spot markets react.
Forward markets are heavily used by hedge funds, banks managing currency, commodity producers/consumers, and algorithms, to measure policy changes, volatility spikes, liquidity tightening, earnings cycles, and geopolitical risk. When forward demand rises sharply, it often signals that large players anticipate movement or need protection. When demand collapses, it may indicate reduced conviction, lower liquidity, and/or unwinding of speculative positions.
Traders can use this indicator for:
Trend confirmation - Rising forward demand supports an existing trend, suggesting institutions are adding exposure rather than fading it.
Reversal detection - A sudden drop in forward demand—especially after a strong trend—can signal exhaustion or a shift toward risk reduction.
· Liquidity stress monitoring - Sharp unwinds in forward exposure often occur during liquidity squeezes, funding stress, or macro shocks.
Overall, the NCFD indicator is best understood as a forward‑looking sentiment gauge. It doesn’t predict price direction by itself, but it reveals how aggressively traders are positioning for future moves. When combined with spot indicators, volatility measures, and macro analysis, NCFD becomes a powerful tool for anticipating shifts in market tone—especially in environments where institutional flows drive price action.
This gauge is another that is interpreted based on extreme readings. Any percentage over 80 signifies overbought conditions, and a likely pullback, while any reading under 10 suggests oversold conditions, and a likely bounce. As with any indicator, it should be used in combination with other reliable sources.
Whatever your investment approach/style, continue to seek out indicators and information that will serve as a guide to likely future price moves (leading), rather than past price action (lagging).
***As always, this information is not intended to be financial advice, or any specific buy or sell recommendation, but rather a guide to assist the reader in some further understanding of current economic conditions.
