Monday, July 27, 2009

NYSE New Highs Contract While SPX Makes 50-day High

Also notable from Friday afternoon is the fact that new highs contracted substantially while the S&P made a 50-day high. The percentage of stocks hitting new 52 week high dropped from a little over 7% on Thursday to under 5% on Friday. I looked at other times the SPX made a 50-day high while the drop in new highs equaled 2% or more of the total issues.

(click image to enlarge)

What I found interesting and compelling about the above test was NOT the size of the average decline. In fact that was somewhat weak. It was the fact that 95% of instances closed below the trigger day close at some point in the next 5 days. This suggests that while the lagging new highs might not indicate an immediate selloff, the market has consistently struggled to move higher.


StrategyTrader said...

Hi. Sorry to sound so thick. How do you get 95% here? From the numbers, I don't see a 95% probability. I see more like 60%


Rob Hanna said...

It's not evident by looking at the table. 60% or so is how many closed lower 1 week later. 95% is how many closed lower than the trigger day close at SOME POINT during the week - regardless of where they finished the week.