NYSE Breadth and Depth Bullish, But Inconsistent

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November 5, 2008

For those of you how are fans of breadth and depth - and perhaps the somewhat obscure 90/10 rule - you may be interested in the last five days worth of advancer/volume data for the NYSE. We’ve still not seen a true 90/10 day since late spring (which clearly wasn’t a buy signal then). However, we’ve seen several 80/20 days. Check out the most recent five days…

*NYSE Breadth & Depth*
Date	# Gainers	Total	% of Total Listed	“Up” volume	Total	% of Total Volume
10/29	1875	3069	61.1%	857,100	1,614,400	53.1%
10/30	2323	2859	81.3%	1,142,400	1,367,000	83.6%
10/31	2183	3064	71.2%	1,160,200	1,559,300	74.4%
11/3	1689	3092	54.6%	493,800	1,011,700	48.8%
11/4	2371	2986	79.4%	1,144,500	1,306,650	87.6%

Surprisingly, only two out of the five were 80/20 days…and the 31st wasn’t a bad day either. However, not once have we seen the single-day pop that screams all the institutions are starting to flow back in.

With Obama’s Presidency now a certainty - and with all those questions answered (for better or worse) - you’d think investors would at least feel comfortable enough to buy-in today….they at least know what the have to deal with for the next four years. But, the market is selling off. It’s doubtful we’ll get a 90/10 day today either, barring a late miracle.

I’m usually not a stickler for these rules of thumb. I used to think a few 80/20 days were as good as one 90/10 day. However, given that we’ve had at least four 80/20 days since October 10th, maybe there’s not a ‘close enough’ clause. Maybe we really need a true 90/10 day to jolt the bulls into a long-term trend.

Oh, and if you’re wondering what a 90/10 day is, it’s a day where 90% of an exchange’s stocks move higher, while 90% of the volume that day is bullish. It’s exchange-specific though, so it’s possible the NYSE does it while the NASDAQ doesn’t (or vice versa). So, don’t develop tunnel vision.

The reason it’s of such interest is that, theoretically, a 90/10 day tells us all those mutual fund managers and institutions are pouring money back into the market after what they think is the ultimate bottom. That’s supposed to open the flood gates, attracting more money into stocks, and pushing valuations up. Needless to say, that’s the kind of action investors want to coat-tail.

The problem so far has been that we haven’t actually seen a 90/10 day, and my 80/20 allowance hasn’t been helpful. It’s quite surprising, given how much cash is on the sidelines, and how oversold stocks are.

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