Economic security

Index indicates panic-like, sell-on-rally behavior

While the stock market rallies Thursday, the NYSE's Arms Index, a volume-weighted breadth measure, has increased to the point that suggests panic-like, sell-on-rallies behavior by investors. The Arms Index tends to fall below 1.000 as the market rises, as the increases in the ratio of volume in advancing stocks over declining volume outpaces increases in the ratio of the number of advancing stock to declining stocks, as buyers become more aggressive than sellers. But despite the Dow Jones Industrial Average DJIA, +0.84% being up 228 points and the S&P 500 SPX, +1.09% up 0.9%, the NYSE's Arms rose to 2.243, which would typically indicated panic-like selling behavior. Readings above 2.000 and below 0.500 are believed to indicate panic-like behavior. The number of advancing stocks on the NYSE outnumbered decliners by a 3.53-to-1 margin, while advancing volume outnumbered declining volume by just a 1.58-to-1 ratio. The last time the NYSE's Arms was that high was when it reached 2.73 on Dec. 4, when the Dow plunged 799 points.