Stock Market Selling Is Broad Based But Nowhere Near Panic Levels

Selling in the stock market is broadly based and heavy, but market internals show no signs of panic, which suggests investors are not yet worried about a lasting decline. The Dow Jones Industrial Average tumbled 243 points, the S&P 500 shed 1.1% and the Nasdaq Composite slid 1.4%. The number of declining stocks are outnumbering advancers by a 2,236-to-584 margin on the NYSE and by a 2,159 to 367 score on the Nasdaq. And volume of declining stocks is 78.8% of total volume o the Big Board and 85.7% of the total on the Nasdaq. But the Arms Index, which is a volume-weighted measure of market breadth many use to measure selling intensity, is up to just 1.024 on the NYSE and to 1.113 on the Nasdaq. The Arms Index tends to rise above the equilibrium reading of 1.000 as stocks fall, because the more intense the selling, the higher the volume in declining stocks relative to the number of declining stocks; basically, investor tend to sell decliners with more intensity than they buy advancers. Many who follow the Arms believe a rise above 2.000 implies panic selling, or capitulation by bulls, which could suggest a bounce would be coming. But at current readings, the Arms Indexes suggest the selling is still calm and collected.

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