A couple of days with overwhelming selling

  • Jason Goepfert

    Jason Goepfert

    Published: 2020-11-02 at 09:00:00 CST

On Monday and Wednesday last week, selling pressure was overwhelming enough that most securities fell, and most of the volume on the NYSE was focused on those issues.

The 3-day average of NYSE Up Issues and Up Volume both dropped to below 20%. That shows wholesale, get-me-out selling pressure. Often, we'll see a lot of down issues, but maybe not a lot of volume. Or maybe there will be a lot of volume flowing into relatively few declining stocks.

Earlier this week, it was both. The 3-day average of NYSE Up Issues dropped to within the lowest 0.2% of all readings since 1962.

NYSE up volume ratio

It's not all that unusual to see extremely depressed breadth over a multi-day period during a bear market. It's rarer to see it when stocks have been holding up fairly well.

Overall, this kind of behavior has typically led to some shorter-term give-back of whatever gains helped to push the Up Issue and Up Volume Ratios above 20%. But over the next 1-3 months, there was a strong tendency to see gains following the selling pressure that was extreme enough to push them both below 20% in the first place.

What else is happening

These are topics we explored in our most recent research. For immediate access with no obligation, sign up for a 30-day free trial now.

  • What happens when short-term breadth recovers during various market environments
  • ETF traders have pulled out of dividend funds, and piled into momentum

Stat Box

The S&P 500 ended up with a loss of more than 1% in October, after setting a multi-year closing high at some point in the past few months. When this happened during any year since 1928, the S&P rose over the next 3 months 10 out of 12 times, with both of the losses being smaller than -3.5%.

Sentiment from other perspectives

We don't necessarily agree with everything posted here - some of our work might directly contradict it - but it's often worth knowing what others are watching.

1. Speculators in S&P 500 futures contracts pushed their net long position to the highest in almost 2 years - Bloomberg

2. The cost of a bitcoin transaction has surged, which usually happens when demand is high (and prices struggle after) - Coindesk

3. Rich people think stocks will drop if we don't have a clear winner on election night - Wall Street Journal

The post titled A couple of days with overwhelming selling was originally published as on SentimenTrader.com on 2020-11-02.

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