Short-term Outlook:  Neutral  From Feb 26, 1107 SPX

Equity Indicators - Updates and Extremes

NYSE New Highs As A % Of Total Issues

Partly as a statistical fluke due to the anniversary of the March 2009 market bottom, and partly due to the recent stock market surge, yesterday we got a historic surge in the number of issues that touched new 52-week highs.

While the data vary from vendor to vendor (mine range from 627 to 914 securities that hit a new high), the one we use for historical comparisons recorded 627.  Still, that accounted for 20% of all issues traded on the NYSE yesterday.

As the chart below shows, that is indeed a rare feat:

Since 1965, it has only happened six other times, all clustered in about a decade's time between 1975 and 1986 (it came close on 10/03/97 and 12/04/03 but didn't quite make the cutoff).

The table below shows how the S&P performed after each instance:

The results were fairly positive.  While the short-term was iffy, the returns after one month and again one year were significantly better than random.  The dates from 1976 and 1978 weren't exactly raging buy signals, but they weren't necessarily great sell signals, either.

Over the next year, the maximum drawdown (i.e. worst loss at any point) averaged -4.9%, while the maximum gain averaged +20.2%.  Only one suffered anything worse than a -10% loss, while four of them enjoyed greatler than +20% gains at some point.  The dates from 1997 and 2003 that just missed the cutoff would have fit right in with those as well.

Dumb Money Confidence

One of the things that we've seen prior to other short-term peaks since the March 2009 bottom was a surge in the Dumb Money Confidence above 70% and/or more than 30% of our indicators in bearish (for the market) territory.

As of yesterday, we got both conditions again.

The table below shows how the S&P 500 performed when the Dumb Money moved above 70% over the past year.  It shows how long it took, and how much the S&P gained at its maximum point, before a short-term correction set in.  It also shows how severe the corrections were.

 

Date	Days 'Til Peak	% Gain 'Til Peak	Days Of Decline	% Loss Of Decline
05/08/09	0	0	5	-5.00%
08/04/09	4	1.20%	2	-2.70%
09/17/09	4	1.40%	7	-4.30%
01/04/10	10	1.50%	12	-7.80%

Obviously, in such a strong trend, "corrections" can be almost laughably brief (in hindsight, anyway).  But it's notable that each time we've seen this, the S&P didn't manage to gain any more than +1.5% at its best point, even though three times it took several days to peak.

And those corrections were, indeed, brief, but relatively stiff.  Three of the four took the S&P down more than -3% from the date the Dumb Money first hit 70%.