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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.
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