NYSE Summation Index Must Not Signal Danger
The NYSE Summation index is a good measure of the liquidity available for stocks. The market needs more than horse power to get higher.
If over a period of time NYSE stock advances are over decliners then the NYSE Summation index will be elevated, and best and most healthy readings are above +500 (using NYSE Summation Index Ratio adjusted).
When the NYSE Summation Index (Ratio) falls below +500 it requires new liquidity (cold cash) to drive up stocks to pass the +500. Some times the charge from below the +500 to above the +500 runs out of steam as there is just not enough liquidity being allocated to the stocks for long sustaining trend to occur. This is shown below when the NYSE Summation Index fails before +500. Market players who try to get the market up soon realize that there is not enough liquidity massing to the rally and that they are very lonely bulls. They will liquidate adding to the bearish sentiment.
Liquidity for a new rally. Where is the cash going to come from? The most recent sell off has seen cash be accumulated in commercial bank deposit accounts. Plus the ES mini COT reports show a large NET long position, a solid rally needs a good supply of net shorts buying back positions, this is not so in Nov 2012.
The Christmas rally will want to see the NYSE Summation Index (ratio) charge up and over +500 with ease. If it does not watch out. Yes, this is where we find out if QE to infinity does exists for stocks. Because there is no rule that printed money go into stocks.
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