Don’t Argue With The $NYSI

EPISODE ONE — $EXPI down 35% since NYSI downturn 2/18.

Kennedy Gammage, the late great market timer, used to say “Buy when the market tells you, sell when the stock tells you.”

With a wink of his eye what he didn’t say was most often the stocks tell you at the same time as the market, and except for rare exceptions, one might as well sell at the same time.

That is what this story is about.

THE TRADING STRATEGY

Mr. Gammage’s market tools were the McClellan Oscillator ($NYMO) and the McClellan Sumation Index ($NYSI). The NYMO is a short term market-breadth indicator based on the New York Stock Exchange Advance/Decline line, and the NYSI is its longer-term brother.

Taken together, they are the clearest indication of mass market psychology which is to say: market direction, up or down.

When the NYMO and NYSI rise, it is time to buy stocks, ETFs, calls, futures, whatever money-maker one likes best.

When the NYMO and NYSI (especially) are falling, it is time to get out of the way of the falling knives.

There really is no reason or excuse for arguing…

Let’s take a look at EXPI, a recent hot stock, one that looks for a long time like it would not do anything but scream higher, so high it recently splits its stock 2-for-1.

And close by the stock split, the NYSI turned down (the blue color coding on the chart below). It’s been nearly cut in half.

Since the NYSI down turn, for swing traders a short in the stock today would be worth 35%, or long-term investors would be suffering a 35% profit loss.

In eleven trading days.

This is why you don’t argue with the NYSI.