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June 10, 2009

Dont Be Fooled...
by Marty Chenard

Don't be fooled by the number of Advancing and Declining issues every day.

Some investors look at the percentage of issues Advancing and Declining and try to have an opinion about the market's direction. That stops short of getting the full story ... here's why:

The data for Advancing and Declining issues for yesterday is below.

Notice the number of Advancing Issues on the NYSE and the NASDAQ indexes below. On the surface, it appears as though the NYSE and the NASDAQ exhibited the same exact buying behavior. But did it really?

This next chart shows the data for Advancing and Declining VOLUME.

When you now look at the volume behavior on the NYSE and NASDAQ, you can see that the actual story is quite different. Volume has a better correlation with money flow than the number of issues advancing in the market.

So, what is this chart saying?

First, it is showing that the Advancing volume was 77.8% for the NASDAQ and only 56.7% for the NYSE. Since the NYSE and NASDAQ were almost exactly equal on the percentage of issues trading, you would have expected that the Advancing volume would have been about equal as well. But it wasn't.

And since the NYSE had 94% more volume than the NASDAQ yesterday, the differential between the NYSE and NASDAQ volume becomes more relevant.

The NYSE is where "program trading" occurs, and where most of the Institutional investors initiate trades. So, this also indirectly reflects what Institutional investors may be doing.

The conclusion for this story is that the NYSE had almost double the amount of declining volume on a percentage basis over the NASDAQ yesterday. That is not the same "pretty picture" that one gets when they only look at the number of Advancing and Declining issues.

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Note: All calculations did not include the number of stocks that had "no change' from Monday to Tuesday.

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Marty Chenard
StockTiming.com
Asheville, NC 28805
Tel: 828-296-1200

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