So far I am not buying into the decline we saw today. One of the main reasons is because market breadth, as measured by NYMO was still positive and did not decline to levels below last Friday, while price today on the SPX (2024), DOW did drop substantially below last Friday’s low (SPX 2041). Hence, on a supposedly big down day there were still more advancing then declining stocks.
I find this suspect, in fact very suspect. Of course, I know, price is always final arbiter, but we do need to also understand the inner workings of the market. And market breadth can help us in that. Since price is final arbiter, it must be said that the NYA -a much broader index than the SPX and DOW and NAZ, only declined 0.60% today. Hence, as the NYMO showed, many stocks were actually doing well today and this was NOT a broad market sell off as the media and other pundits may want us to believe.
If we then take a look at the NYSI, (cummulative NYMO) we see that it turned back up last week, which is a first initial buy signal, and that it already yesterday also crossed the 13EMA from below, confirming the buy signal. Today’s price action did not change a thing about it. In fact, as long as NYMO remains positive, the ball remains in the bulls camp. Bulls should get (more) worried with a negative NYMO and a subsequent declining NYSI. Not when both are rising.