Zero New Lows: Rare & Bullish For The Stock Market
Published September 8th, 2009 in Market Internals Tags: market breadth, new high, new low, tape action.This is a guest post by Wayne Whaley (CTA):
It was recently pointed out by a reader of this blog that we have had several days this year where no stocks made new lows and the reader theorized that this is a very rare and potentially bearish event. Databases vary, but my database has 73 such days since 1970 where no new lows occurred.
If you measure from the initial occurrence of each time period, we can see the trading record of these events:
My personal take is that the occurrence of no new lows in March of 2009 was a very bullish event since it occurred in combination with very strong breadth thrust from the advance-decline line and up/down volume. Tape action that could potentially support the case for higher stocks for sometime. The observance of new lows in August is not as bullish, because the results for no new lows, 5 months after the initial read is mixed with a bullish bias. However, I would be hesitant to view the recent no new low days as a sign the market is overextended, especially given the repeat advance/decline thrust in August.
A more revealing bearish characteristic of the new highs and new lows tape action would be a period of an abnormal number of issues making both new 12 month highs and lows suggesting that the market is no longer trending and potentially confused.
market breadth, new high, new low, tape action
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Wayne,
Thank you. Good info; good work. Please post more often; have noticed some occasions in the past.
Just hope that you’re not a permabull. For information purposes, when was the last time that you were intermediate-term bearish ?
Dave ,
I am a trader and unfortunately short the sps today. My intermediate outlook is inconsequential but I do normally have one and it is usually based on Tape action and Fed policy.
No New Highs Table clarification.
Since New Highs and New Lows are based on a 12 month trailing trading range, the quantities tend to run in streaks for often months until the trailing trading range changes. The eight periods listed on the right of the table were periods of time in which the 73 No New Lows days occurred, not everyday, but occasionally during that period. In listing the results, I used the very first observance of a new low and considered any repeat observances in the next 252 days as a repeat.
Subject to whether today’s tape number’s hold, it looks like the NYSE posted no New 12 Month Lows for the first time since Jan 05, 2010. I also have the 10 day NH/(NH NL) index at 98.5, climbing toward the important 99.0 level.
The number of new highs today were 358. The previous high was 523 on Jan 11, 2010. It will be interesting to see if we can exceed that. According to the study Babak posted by NDR, the number of stocks making new highs in a given week normally peaks well in advance of price. It would be encouraging for the bears if the number of new highs in this advance does not expand much further from current levels. Let’s keep an eye on it.
Updating the above study, certainly the signal on March 26 of 2009, has played out well, up 34.27% with a couple of weeks to go in the 252 day (one year) window.
Days since that study with no new lows are,
April 09, 2009
July 01,
August 07, 24, 27, 28, 31
Sept 03, 21
Dec 24,29
Jan 05, 2010
Mar 02, 2010