Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Buzz & Banter



Tony makes a good point. Of the 3,500 or so issues listed on the NYSE, you can slice and dice them in several different ways (taking out foreign entities, REITS, bond funds, preferred shares, etc.). I don't doubt Lowry's figure of 48% of the issues being non-operating. Adding to the challenge, decimalization may have an impact on the breadth figures as well. If it took a 1/16 (6 cents) move to push a stock into changed territory before, now it only takes as little as 1 cent.

My approach to these kinds of dilemmas is to keep a close eye on the traditional figures. If they work consistently, then use them. If not, then toss them and find something else, or figure out a way to adjust them for changing market dynamics. Unless and until the breadth figures that are reported fail to work consistently, I don't believe in monkeying with them too much. There will always be some outside trend that seems to have an undue influence on a particular segment of the market, and trying to constantly adjust for that is just about impossible (e.g. low interest rates and their impact on the closed-end bond funds).

In any event, if we look at the breadth figures (10-day average of the advance/decline line as a percent of total issues traded) for the securities in the S&P 500 and compare that to the figures for the NYSE in total, they are remarkably similar. The S&P 500 readings will be more volatile simply because there are fewer issues, but the trends and relative highs and lows are very close. In fact, they have had a correlation of 0.89 during the past year. This is very strong and the chances of it occurring by chance are essentially zero.

Certainly the securities in the S&P 500 can be considered operating companies. And since there is such a close correlation between the breadth figures for the S&P and that of the NYSE, I don't think it's necessary -- at this point -- to go through the exercise of adjusting for non-operating entities.

< Previous
  • 1
Next >
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos