Despite the sharp selloff in the stock market, with the Dow Jones Industrial Average taking a 474-point, or 1.4% dive and the Nasdaq Composite shedding 0.4%, market internals are showing no signs of panic selling. In fact, some may interpret the readings as suggesting a buy-on-dip mentality is more prevalent. The NYSE Arms Index has fallen to 0.435, according to FactSet data, with levels below 0.500 viewed as suggesting panic-like buying, while the Nasdaq Arms Index declined to 0.653. The Arms Index is a volume-weighted breadth measure that tends to rise above 1.000 when the market is declining, as volume increases in declining stocks more than in advancing stocks, with rises above 2.000 viewed as depicting panic-like selling. With the Arms declining, it means the volume in advancing stocks is greater on a relative basis than volume in declining stocks. For example, the number of declining stocks is outnumbering advancers by a 5.37-to-1 margin on the NYSE and by a 2.83-to-1 margin on the Nasdaq, while volume in declining stocks is outnumber up volume by ratios of only 2.34 to 1 on the NYSE and 1.85 to 1 on the Nasdaq.
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