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August 24 - A True Market Washout?
It doesn’t happen too often, but occasionally we witness a true stock market “washout”. That is, a selloff marked by extremely one-sided (to the downside) trading action. Such days are exhibited by market participants that just want out at any price. The result is a day in which all market statistics are overwhelming skewed negatively. Such was the case yesterday, August 24.
Here are but a few examples from the New York Stock Exchange:

Yesterday saw the 4th lowest % of NYSE Advancing Issues – 4.1% – since 1965. Each of the other 13 occurrences with less than 6% Advancing Issues saw the market form at least a short-term bottom within a day – except for one: the fall of 2008. That selloff, while not much longer in duration, did suffer extensive damage in subsequent days.

Yesterday saw just 2.38% of the volume on the NYSE go into Advancing Issues. Since 1965, there have been just 20 days with less than 6% Advancing Volume. Again, the market bottomed almost instantly (if temporarily, at times) following most such readings.

New 52-Week Lows Minus New Highs accounted for 40% of all issues on the NYSE. Readings that high have only occurred 15 times since 1970. This series was especially accurate in identifying intermediate-term market lows.
One reason why, perhaps, is that the market was already extremely washed out coming into most of these day. The S&P 500 was a median of 30% off of its 52-week high during these occasions. That makes the current case unique as the index is just 11% off its high. This is not unprecedented, however. In May 1973, the S&P 500 was off 11% from its 52-week high. Instead of putting in an intermediate-term bottom, the market would eventually go on to accelerate its cyclical selloff, suffering a steep drawdown in the longer-term. The parallels to the current case should not be totally discounted.
Based on history, such washed out readings like we saw today should signal a coming end to the initial part of this decline in the next day or two. However, considering the selloff began with the major averages near their 52-week highs, a resumption in downside pressure would not be a surprise following whatever type of bounce materializes over the next few days or weeks.
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If they weren't liquidating gold yesterday, it wasn't a washout.
Concur urban Redneck
me too, with one caveat: what gold isn't a relevant part of the US markets anymore? consider the various angles: portfolios, funds, FX, tastes, etc.
The Fed is going to raise the interest rate soon. So a little ramp up helps the cause for a later dump.
Depends on whether its real gold or the fairy gold the market plays with.......
Check back in on Friday.....................there maybe more on this
Is there not also record buying at the same time. Who buys what is sold?
Anyone? Bueller? Anyone?
The buyer of last restort, of course. ;)
"You down with PPT? Yeah, you know me. How 'bout FOMC? Yeah, you know me!"
In addition to margin clerks not liquidating their favorite PM whipping boy, there simply wasn't volume indicative of a washout yesterday. What there was... was an ugly close on Friday, a bunch of ugly TA tea leaf readings, and very thin market depth which created volatility (of Profit! in HFT manipulation speak).
http://www.masterdata.com/Reports/Combined/Volume/Daily/$NYA.htm
I understand what you are saying and have stated the same thing before - the only way I can wrap my head around it is using the concept of supply, demand and equilibrium price.
You have a supply curve that indicates prices and quantities people are willing to sell - slope is up from left to right
The higher the price the more they are willing to sell.
You have a demand curve that indicates price and quantities people are willing to buy - slope is down from left to right
The lower the price the more they are willing to buy.
Where these two curves intersect you have the equilibrium price that clears the market.
When they say you have more sellers - it means the whole supply curve has shifted down and to the right which means more people are willing to sell at lower prices before the equilibrium price is reached.
Of course the demand curve can (does) also move at the same time - down and to the left - but that makes things messy - so let's pull a typical economist trick and say - all other things staying the same.
But the - "more sellers" is referring to a shift in the whole supply curve not a move along the curve.
Maybe 1 million shares were available for sale and had buyers (equilibrium price) at $50 a share - but now 2 million shares are available at $45 a share before equilibrium price is hit. So even though there is in fact an equal number of buyers and sellers (duh right) you have both a lower price and greater number of willing sellers.
In the normal logical way we think about supply and demand - the number of sellers should decrease when the price drops - we have a situation where we have more people willing to sell even if the price is lower.
I am not saying this is a perfect way to explain it - but it is how I see it.
Exactly Via Dana Lyons' Tumblr, and now back to our regular scheduled dollar debasement and equity crash-up.
It's not too late to be long ES.
GO!
My financial buddy tells me to expect a 40%-to-50% correction of most of the market to play catch up to reality where oil and other commodities have already corrected 50% to 60% and many companies are simply going Belly Up, floating in the water like Baby Ruths.
That's my feeling as well, today is just a bull trap.
That makes the current case unique as the index is just 11% off its high. This is not unprecedented, however. In May 1973, the S&P 500 was off 11% from its 52-week high. Instead of putting in an intermediate-term bottom, the market would eventually go on to accelerate its cyclical selloff, suffering a steep drawdown in the longer-term.
The parallels to the current case should not be totally discounted.
So why then write?
Based on history, such washed out readings like we saw today should signal a coming end to the initial part of this decline in the next day or two. However, considering the selloff began with the major averages near their 52-week highs, a resumption in downside pressure would not be a surprise following whatever type of bounce materializes over the next few days or weeks.
This is just double talk
So, the markets will climb higher by -50% then. Right?
The Author using "unique" and "however" muddied his point; he should have just said "this matches 1973" and avoided trying to sound balanced by throwing in unnecessary words.
You'd have to be a native speaker to tease out that the author is saying "this is just like 1973" using a few too many words.
Wished they just call a spade a...........................spade
Like saying a fork is an eating implement....................it's a fork!
lol...yes, agree. "Turn left at the fork in the road.":
http://img4.wikia.nocookie.net/__cb20060322164920/muppet/images/2/27/ForkinRoad.JPG
Cheers.
There is some serious retardation happening when one compares the sell-off from an oil hike with the sell-off from cratering prices for same as 'parallels'.
When the U.S. resumes its war-drum beating with accusations in earnest towards China of 'currency manipulation', 'hacking' and 'sand castles', you will see the beginning of the end --- or, the end of the beginning as it were, with all things related to 'gold'.
We will just heat the earth until all of the gold vaporizes.
Yeah, that's the ticket.
So in other words, nobody knows. Thanks for the words of wisdom.
If it was a true washout, nowhere to go but up from here.
Perhaps we'll get a 1987 type awesome crash... Here's hoping
Guess I should have bought on the dip...should have listened to Jim Cramer...damn...I am like a ship without a rudder...well at least I have my gold..what now it is getting slammed...is there no mercy in the markets?...nope!