The Summation Index ($NYSI) is an abstract oscillator followed by many professional traders. Within the course of a year’s time, it will often issue a number of buy and sell signals. However, as I see several indicators now flashing more serious warnings, I think it’s time we take a closer look at this index as the next move down could be more significant.
that the Summation Index has reached overbought on the RSI,
though in my general observations with NYSI, the investor sell signal on
the current up-cycle doesn’t confirm until RSI begins to drop out of
the overbought zone (at 70 on the scale).
The Summation Index ($NYSI) measures the accumulated
readings of the McClellan Oscillator, which is widely used by pro
traders for spotting short term cyclical moves. By itself, the McCllelan measures
market breadth (advancers vs decliners), and so if the $NYSI is moving
demonstrably lower, this means that advancers are losing their edge over
time against decliners.
Even though the major indexes (Dow, S&P and Nasdaq) continue to hold their gains for the year,
keep in mind that the big money players can advance the large cap
weighted stocks higher even as most stocks begin to fall. In other
words, fewer and fewer stocks are participating in the recent rallies,
but the indexes move higher so long as the largest cap weighted stocks
continue to carry the indexes like SPX higher. (This may explain why the
Dow has not moved as well lately, because the Dow is not a cap-weighted
index–it’s a price-weighted one.)
Anyhow, notice the peaks on the NYSI…if this is the
peak for this cycle, then $NYSI has set its 2nd lower high in a
row….the 2nd lower low is already in place, thus a down-trend channel
has arisen on $NYSI. There is thus, a marked divergence from the rising
up-trend (before Friday) in the S&P and NYSE listed stocks.
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