Back to Comment Menu   

  I Spy With My Little Eye...Fewer New Highs

November 12, 2009

 

--------------------------------------------------------------------------------------------------------------------

This is an abbreviated sample of a comment posted for subscribers

--------------------------------------------------------------------------------------------------------------------

 

A popular topic today will no doubt be the plunge in stocks closing at new 52-week highs, which showed more shrinkage than a man's libido after an ice-cold bath.  Despite the S&P closing higher than it did in mid-October, less than half the stocks trading on the NYSE went along for the ride than they did then.

 

 

This is a huge shift in sentiment.  But does it matter?

 

Most will assume that it does, and that it's a very bearish sign for the market going forward.  I don't like to assume (that whole ass-u-me thing), so let's try to quantify it and look at historical reactions.

 

Let's go back to 1965 (the furthest back that we have reliable new high / new low data for the NYSE) and check for the following conditions:

 

1.  The number of new highs on the NYSE hits its highest level in at least 3 years

 

2.  The S&P subsequently goes on to eventually make a new high sometime in the next 3 months

 

3.  When the S&P makes that new high, the number of NYSE new highs shrinks by at least 50%

 

Not too many conditions there, and it helps approximate our current conditions.  We got a big jump in the number of new highs in October, more than we'd seen in several years, the S&P corrected then pushed to a new high, and yet the number of NYSE new highs has been cut in half.

 

Here are the other times it has occurred:

 

S&P 500 Performance After Hitting A New High

With Decreasing NYSE New Highs

Date

1 Week

Later

1 Month

Later

3 Months

Later

6 Months

Later

1 Year

Later
09/24/68 0.6% 0.8% -1.6% -1.0% -6.7%
04/08/71 1.4% 0.3% -1.4% -2.0% 7.3%
03/23/76 -0.2% 0.7% 1.2% 5.5% -1.2%
10/18/82 -2.5% -1.0% 7.3% 16.8% 24.2%
01/06/83 0.3% 0.6% 4.5% 15.3% 16.2%
03/26/86 -2.0% 2.1% 4.9% -0.4% 26.6%
05/27/86 0.3% 1.7% 1.3% 0.5% 18.1%
06/27/89 -2.4% 4.1% 4.8% 5.6% 7.2%
01/02/92 0.1% -2.0% -3.1% -1.0% 5.2%
03/10/93 -1.8% -3.2% -2.3% 0.1% 2.1%
02/05/96 3.1% 1.6% -0.1% 2.9% 22.7%
02/03/97 -0.2% 1.9% 5.5% 20.8% 27.9%
12/05/97 -3.1% -2.0% 8.2% 13.7% 20.7%
12/11/03 1.7% 4.7% 3.1% 5.7% 11.9%
         
Average -0.3% 0.7% 2.3% 5.9% 13.0%
% Positive 50% 71% 64% 71% 86%

Any random time...
Average 0.1% 0.6% 1.8% 3.6% 7.1%
% Positive 55% 59% 62% 65% 69%

 

Performance going forward wasn't great...but it wasn't terrible, either.  In fact, other than the short-term of a week later, the S&P sported a higher average return, and more consistently so, than during any other random period, increasing the further out we look.

Back to Comment Menu   

GET A RISK-FREE TRIAL NOW

Home | Commentary | Indicators | Models | Sectors | COT | Subscribe | About Us

 Disclaimer  |  Privacy Policy

 

© 2001-2007 Sundial Capital Research, Inc.  All rights reserved.  Disclaimer.  sentimenTrader.com is a trademark of Sundial Capital Research, Inc.  Sundial Capital Research, Inc.  PO Box 341 St Michael, MN  55376

e-mail:  admin@sentimentrader.com