on November 4th of 2008. Today the utilities closed at 387.70. This could be a

major double top,which is very bearish. To break this pattern the utilities would

have to close at 390 or above. Remember in 2007 there was a major double top

in the 450 area. I previously had pointed to this indicator, because no one had

noticed it. At this point in time keep a close eye on this indicator.

still worried that you could possibly have a double top in the S&P cash at 1071.

There are still a number of positive readings left for this rally. The breath figures

made new recovery highs, and the major averages (50,150,200) are still rising.

Volume has been light and the Transportation and Utilities have been weak.

Next week, with options expiring, should give more clues to the next direction

of the market.

“As I pointed out a few weeks earlier, having zero new lows can be a bearish signal. The number of highs to new highs and lows on a ten day period was recently at 99.3%. In other words, it can’t get much better than that. The total of new lows so far have been almost nonexistant.”

August, it is possible that you are correct and the market is putting in a top, but I wrote a detailed post on why the market can possibly go higher when there are no new zeros based on the 73 occurrences found since 1970, that you might want to give a perusal

http://www.tradersnarrative.com/zero-new-lows-rare-bullish-for-the-stock-market-2955.html

If you have already read it, let me try another angle on this subject and see if this makes more sense.

On October 5, 2009 (yesterday),

1. The S&P closed at 1040.46
2. Number of issues traded was 3162
3. New Highs were 189 and New Lows were 2
4. Your measure of preference NHs/(NHs NLs) would be 99% on a one day level, and if we took the time to look it up, would be similar on a 10 day level, somewhere in the 99-100% range as it has been for the last 2-3 months.

For illustration purposes, lets suppose that by May 1, 2010

1. The S&P manages to make it to 1100ish
2. The number of issues traded is still 3162ish
3. The number of New Highs has probably increased from the 175-200 daily range to something like 350 a day and New Lows are still hovering in the 0-5 range.
4. The NHs/(NHs NLs) ratio as you stated would still be 99-100%

Observation on May 1, 2010 scenario,

The ratio of New Highs to New Lows peaked at 99-100% in mid 2009, but the percentage of stocks making new highs as a percentage of “Issues Traded” continues to rise. Or said another way, although the number of stocks going to zero can not go lower than zero, the number of stocks making New Highs can continue to climb from the current level of 175ish a day to theoretically all the way to the number of issues traded (3000ish).

Also it doesn’t hurt that by mid 2010, the 2009 twelve month trailing range for stocks will be much lower than it is today with the 2008 year having dropped out of the range, thus making it much more conducive for stocks to make new “12 Month” highs.

And mathematically, even if every stock on the board made a new high on the same day sometime down the road, the market could continue to rise as the individual stocks simply continue to make repeated New Highs.

Your comment that the ratio of NHs to NHs NLs can not get higher than one can not be argued with, but it doesn’t mean that the number of NHs can not continue to increase and that the market can’t go much higher.

Good luck with your trading/investing.

period to the 19291930 rally and major decline. There is many differences. While the

rally that took the dow to 300, the 200 average was declining near 300. Today’s rally

is far above the 200 day average and is not declining.

Even though I believe we are still in a bear market, at this time I cannot say with

any confidence, that a major decline is underway. For example, the 10 day breath

has turned negative, but the 30 day breath is still positive. Also, the ten day trin or

arms index is at 1.49. This reading is closer to being oversold and not a position to

having a major decline. Usually, this indicator would be overbought when there is

an imminent decline like 1987.

A 50% timeout ?

market, I think we have seen the top. As I pointed out a few weeks earlier,

having zero new lows can be a bearish signal. The number of highs to new highs and

lows on a ten day period was recently at 99.3%. In other words, it can’t get much

better than that. The total of new lows so far have been almost nonexistant.

I was hoping for more sideways action. The 150 moving average is still rising sharply.

In fact, that moving average is taking off the lows of the market in March.

I’m scared that this market could fall apart. I hope my fears are wrong. Technically,

it shouldn’t happen until sometime in early 2010.

“the studies that I have done suggest that either an enormous number of stocks making new highs or new lows is bullish”.

If only 0.04% of such stocks making either new highs or new lows were making new highs on Mar 06, then that would leave 99.6% making new highs, an enormous number, inline with my comment that such readings are bullish.

The only bearish interpretation I stated of NHs and NLs in my comments was that a large percentage of stocks making both new highs and new lows is often bearish.

Also in response to any assertions that buying the market when the majority of stock s are making new highs is crazy. I would advice buying the stock market before the majority of issues are making new highs, but the table of stats I posted above suggest that you don’t want to fade such occurrences either. For those readers interested in hard statistics, you can see from the table posted in the previous reply that when the percent of stocks making new highs over a 5 day period is in it’s extreme high range exceeding 29% of “issues traded”, the S&P has been up 100% of the time a year later (since 1970). I have the same stats using the (NHs NLs) as the divisor rather and ‘issues traded” and the result is similar. If you are looking at periods where there were only 0-2 new lows a day, it is insignificant which of the two divisors that you choose, the % is going to be in the low end (0 to 1 %) of it’s trading range.

To be on the same plane, you must take the % of new highs to new lows and highs

for a 10 day period. To say that at 99% new highs to total highs and lows is a good

time to buy is crazy. For example, at the bottom of the market on March 6th,

the percentage of new highs to total new highs and lows for the 10 day period was

.004. Based on your impression, you would have considered that to be a perfect

sell signal.

Doing a visual examination of the above occurrences, many of these 5 day periods had days where no stocks made new lows.

(that is, made new lows not new highs)