Positive Sign from New High New Low Indicator

Mar 13, 2009: 9:35 AM CST

In looking under the hood a bit at the last few months on the S&P 500, we see an interesting sign of life – that of a three-swing positive divergence in the Net New Highs – Net New Lows Breadth Indicator.  Let’s see it.

S&P 500 Daily:

What the bottom indicator shows is the NYSE Net New Highs minus Net New Lows.  On balance, we’re clearly under 0, meaning more new lows are being formed than new price highs (on securities that make up the NYSE index), which explains why price keeps making new lows.

However, if you look closely, you’ll see that the recent 665 price low on the S&P 500 (and Dow Jones) was made with fewer stocks making new lows than the previous two swing lows in October and November – this is potentially a sign of early strength (or at least an indication that fewer stocks are making new lows when compared to new highs).

It’s a little ‘under-the-hood’ metric that helps reveal broader participation, and it’s a good sign for the bulls to see this developing on the chart.  We’d still like to see price get above the 20 and 50 EMA before getting bullish though, and particularly break the 800 level for confirmation.

It doesn’t necessarily mean we’re at a bottom (though it would hint that), but it means that there’s a little more going on in the market than blatant puking of shares at low prices.

Corey Rosenbloom
Afraid to Trade.com


4 Responses to “Positive Sign from New High New Low Indicator”

  1. gamingthemarket Says:

    What do you make of the lack of volume in DIA during this rally vs. massive volume in FAS/FAZ?

  2. Corey Rosenbloom Says:

    Hmm good call – I’ll look into it and try to do a post on it this weekend if I get a chance.

    May mean the days of single-leveraged – plain vanilla – ETFs are numbered, which surprised me like crazy.

    Or that people are just willing to juice up their returns and make a quick buck (dangerous strategy for most people).

    It’s perhaps just part of the ever-changing and dynamic landscape of the market.

    One thing’s for sure, I’m making a shift to the SPY/@ES from the DIA/@YM starting next week and looking at the volume confirms why.

    Oh, in quick, the reduced volume in the DIA and SPY off the recent lows is a non-confirmation of higher prices.

  3. laurelweiner Says:

    thx Corey

    now if we could just get a handle on tne equity put call ratios in real time!!!

    anythoughts on the complacency factor we saw friday?

    thank you in advance

  4. laurelweiner Says: