Whereas whole quantity in single title shares and particularly ETFs soared yesterday exploded amid the broad hedge fund and systematic selloff, a special image emerges when attempting to measure how one-sided the bearishness of yesterday’s motion was.
As BMO technical analyst Russ Visch writes in his morning observe, a greater approach of visualizing the promoting stress yesterday is thru the NYSE “ARMS” index, which is a method of figuring out market energy or weak spot by analyzing the connection between advancing shares and declining shares and their respective volumes.
And, in accordance with Visch, “the upper the quantity, the extra closely one sided the promoting is.” Particularly, readings over three.25 are likely to happen at/close to vital buying and selling lows…. and as proven within the chart beneath, “we had been nowhere close to that stage yesterday.”
In different phrases, there was no promoting panic, and no respectable liquidation because the selloff was largely a perform of coordinated deleveraging by each hedge funds and systematic merchants. Which brings us to Visch’s easy conclusion: “Count on extra draw back.”