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| Updated Figure 1 on 02/25/2022 (Courtesy of stockcharts.com) |
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| Updated Figure 2 on 02/25/2022 (Courtesy of stockcharts.com) |
(Original article posted on 03/18/2018)
Very basic forms of technical analysis—like trendlines, support and resistance, and flag/pennant formations—are pretty useful. Not because they work, but because people believe they work, so they work. Also, much of algorithmic trading is based on trading these sorts of technical formations.[4]
In this article, we will cover the topics of using new 52-week highs and lows on the NYSE to monitor the internal strength or weakness of broad stock market.
Net New 52-Week Highs ($NYHL; see Figure 1) is a simple breadth indicator found by subtracting new lows from new highs. “New lows” is the number of stocks recording new 52-week lows. “New highs” is the number of stocks making new 52-week highs. This indicator provides an immediate score for internal strength or weakness in the market. There are more new highs when the indicator is positive, which favors the bulls. There are more new lows when the indicator is negative, which favors the bears.
The NYSE are usually in strong uptrend when Net New Highs is consistently above +100. Conversely, strong downtrend usually prevail when Net New Highs is consistently below -100.
The chart above shows the NYSE in black with the High-Low Cumulative Line in red/black and a 10-day SMA of the indicator in blue (see Figure 2). The High-Low Line rises as long as it holds above the 10-day SMA (blue line). The market shows strength when new highs consistently outpace new lows. A move below the 10-day SMA means the High-Low Line is falling and new lows are outpacing new highs, which shows underlying weakness in the index.
One evident token of the market’s latest increased selling pressure can be seen in the above chart. This shows the daily progression of the cumulative new 52-week highs and lows on the NYSE. The cumulative new highs and lows indicator should be confirming any rise in the S&P 500 index in order to ensure a healthy broad market outlook. As can be seen here, though, the cumulative highs-lows indicator hasn’t kept pace with the recent gains in most major averages. While this indicator has at least remained stable in recent weeks, it needs to turn up again which would reflect a strengthened demand for stocks. As long as this indicator is trending sideways (see Figure 3), any gains which are made in the major averages are likely to be limited while rallies will be unsustainable.[2]
In this article, we will cover the topics of using new 52-week highs and lows on the NYSE to monitor the internal strength or weakness of broad stock market.
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| Figure 1. $NYHL on 03/16/2018 |
$NYHL[1]
Net New 52-Week Highs ($NYHL; see Figure 1) is a simple breadth indicator found by subtracting new lows from new highs. “New lows” is the number of stocks recording new 52-week lows. “New highs” is the number of stocks making new 52-week highs. This indicator provides an immediate score for internal strength or weakness in the market. There are more new highs when the indicator is positive, which favors the bulls. There are more new lows when the indicator is negative, which favors the bears.
The NYSE are usually in strong uptrend when Net New Highs is consistently above +100. Conversely, strong downtrend usually prevail when Net New Highs is consistently below -100.
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| Figure 2. 10-day SMA of $NYHL Cumulative |
10-Day SMA of $NYHL Cumulative [1]
The chart above shows the NYSE in black with the High-Low Cumulative Line in red/black and a 10-day SMA of the indicator in blue (see Figure 2). The High-Low Line rises as long as it holds above the 10-day SMA (blue line). The market shows strength when new highs consistently outpace new lows. A move below the 10-day SMA means the High-Low Line is falling and new lows are outpacing new highs, which shows underlying weakness in the index.
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| Figure 3. Cumulative $NYHL |
Cumulative $NYHL
One evident token of the market’s latest increased selling pressure can be seen in the above chart. This shows the daily progression of the cumulative new 52-week highs and lows on the NYSE. The cumulative new highs and lows indicator should be confirming any rise in the S&P 500 index in order to ensure a healthy broad market outlook. As can be seen here, though, the cumulative highs-lows indicator hasn’t kept pace with the recent gains in most major averages. While this indicator has at least remained stable in recent weeks, it needs to turn up again which would reflect a strengthened demand for stocks. As long as this indicator is trending sideways (see Figure 3), any gains which are made in the major averages are likely to be limited while rallies will be unsustainable.[2]
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| Chris Ciovacco: "A still constructive look in NYSE New Highs - New Lows" (10/28/2024) |
References
- Net New 52-Week Highs (Stockcharts.com)
- A Final Flush-Out For Equities
- Weakening Internals
- Lucky Rabbit’s Foot (The 10th Man)
- Tom McClellan: High-Yield Bond A-D Line
- Junk bonds are the canaries in the stock market’s coal mine.
- IDENTIFYING BEAR MARKET BOTTOMS AND NEW BULL MARKETS
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