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The new high, new lows indicator looks at the number of stocks within a group (say the S&P 500 or the Nasdaq) making 52-week new highs and new lows. It ranges from 0 to 100. The low ranges mean a lot of stocks making 52 week lows and not many making 52 week highs. And the high ranges mean the reverse.
As you imagine, this sort of information can be very useful at finding inflection points. When the market is very oversold, we usually find a lot of new 52 week lows relative to 52 week highs. So keeping an eye on this indicator is useful.
After today’s lackluster trading, this indicator for the Nasdaq fell more than 38 points to just under 30. This is low but still not extremely so. If the market drops again, it will push this indicator low enough that we would set up for a bounce higher.
Of course, within a strong bull market shallow retracements are more prevalent. So we could recover without any further damage. But for a really nice intermediate bottom, I’d prefer to see a reading of 10 for the new highs, new lows indicator.
Anyway, I wanted to point this out ahead of time because I prefer bring to your attention things which may be actionable. It may set up or not. But in either case, its more useful to talk about possibilities than point them out after the fact. Hindsight is 20/20.
Here’s the chart for the past 3 years. Note that while the Nasdaq’s chart is weekly the indicator’s chart is daily:
The other insteresting data point comes from the options market. The put call ratio (equity only) spiked significantly higher today but didn’t reach extreme levels. Similar to the new highs new lows indicator, if we have another bout of selling like today’s, the put call ratio will get there.
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