Despite the sharp selloff in the major stock market indexes, market breadth readings suggest investors are acting calmly, and may even viewing the weakness as an opportunity in some cases. The Arms Index is a volume-weighted breadth measure that measures the ratio of advancing stocks over declining stocks, over the ratio of advancing volume over declining volume. The Arms tends to rise above 1.000 when the market declines, as declining volume tends to rise relative to advancing volume at a higher proportion than decliners rise relative to advancers–that increases the denominator more than the nominator–as sellers often get more aggressive in down markets. But on Tuesday, the NYSE Arms rose to just 1.251 while the Nasdaq Arms actually fell to 0.792. The number of declining stocks outnumbered advancers by a 3.01-to-1 margin on the Big Board and by a 2.88-to-1 score on the Nasdaq, while volume in declining stocks outnumbered advancing volume by 3.77-to-1 on the NYSE and by 2.28-to-1 on the Nasdaq. Meanwhile, the Dow Jones Industrial Average DJIA, -1.01% dropped 441 points, or 1.6%, the S&P 500 SPX, -0.66% slid 1.2% and the Nasdaq Composite COMP, -0.55% shed 1.3%.
Stock market's selloff showing no signs of panic
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