Yesterday I wasn’t convinced of the downside yet, as market breadth had not deteriorated as much as a down day like that would normally suggest. (click each picture to enlarge)
However, today the bears followed through and were able to push NYMO into negative territory. This, as mentioned yesterday, is where bulls need to get concerned as now the decline number of stocks out pace the number of gaining stocks.
Because NYMO is now negative, the NYSI has now started to decline. Since NYMO and NYSI are 2nd and 3rd derivatives of price they are not useful in determining next day swings, however they do show that the bears now have the bull and it’s up to the bulls to put it back in their courtyard.
Last but not least I wanted to show the SPX-SI which shows also that breadth for the SPX has turned for the worse and is pointing down again.It has pretty much been in decline since the early December 2014 high. However, it is now approaching levels that over the past 4 years coincided with significant bottoms. But even the last turn up did not result in any follow through to the upside, so it’s hard to determine any bottom level from this.
In conclusion, not until the bulls can get market breadth in positive territory again and push it into double digit areas, will the number of declining stocks out number the increasing stocks for a healthy uptrend.