Still looking for signs of a market crack-up. Breadth is always a good place to start.
The lower pane shows a simple 52 week New Highs and New Lows indicator. It includes de-listed stock data and uses all major exchange listed stocks and excludes OTCBB stocks.
The bearish divergence is not extreme, but it is noticeable.
First, during March and April of 2010, there were many spikes above the yellow horizontal line. Currently, we’ve have only one spike above the line, and that was in November. Also note that the 9 day moving average of New Highs has yet to reach the levels seen during 2010.
If we observe the New Lows, we see that they have been increasing, since December, 2010. We expect them to increase during times of weakness, but not when the market has been going up at a 45 degree angle. From July 2009 to May 2010, the New Lows never increased while the market was trending up.
At this point, I still believe that a slight pullback is much more likely than a significant correction, but it looks as if there is increasing evidence that a more serious correction may be developing.
Wood – Thanks. Always appreciated.
Wood – you might want to exclude such “stocks” which are really fixed income investments = preferred stocks, closed end bond funds, etc. I guess they are contributing to new lows.
Interesting. I had not thought of that. Thanks!