When the NYSI turns up it is time to buy stocks.
And when the NYSI turns down, like now, it is time to go to cash or to go short.
For example, BA and CGA.
BA (Boeing), a stock in the Dow, is down 2.42% at the moment on bad news. It announced it would not reinstate its dividend any time soon. Who could not see that coming?
Funny how bad news so often agrees with the NYSI going down.
CGA (China Green Agriculture) is a fertilizer company. Its stock is down 17% as of this writing triggered by the NYSI sell signal on today’s open. That is simply a case of a high-flyer that just got hit by as shift to the negative in general market psychology.
Most stocks move with the market. Simple as that.
The NYSI signal, long or short, is displayed as dollars per $10K traded in the white flag on the right axis in lowest quadrant of the chart.
Kennedy Gammage, the late great market timer, used to say “Buy when the market tells you, sell when the stock tells you.”
With a wink of his eye what he didn’t say was most often the stocks tell you at the same time as the market, and except for rare exceptions, one might as well sell at the same time.
That is what this story is about.
THE TRADING STRATEGY
Mr. Gammage’s market tools were the McClellan Oscillator ($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…