Above are 2 charts from the fantabulous Index Indicators site that I honor useful. The transcend nautical chart tracks the percent of SPX stocks making fresh five-day highs. The bottom nautical chart tracks the percent of SPX stocks making fresh five-day lows.
Typically nosotros run across five-day highs wane in addition to five-day lows expand equally marketplace set cycles transcend out. We too conduct keep been seeing five-day lows crescendo ahead of wheel cost lows.
Yesterday, nosotros unopen modestly higher inward SPX, only novel lows expanded in addition to novel highs contracted. Rob Hanna of the insightful Quantifiable Edges service of late issued a question report that noticed downside tendencies when the marketplace set rises only the proportion of rising stocks falls curt of 40%.
Price activeness during the electrical flow marketplace set wheel has been somewhat distorted, only I’m viewing the electrical flow wheel equally having begun alongside the mid-December lows, having peaked at the slow Dec highs, in addition to at ane time inward a downwards phase. If that is the case, nosotros should run across at to the lowest degree ane farther downwards leg to the marketplace set that would conduct keep us below those Dec lows. A dramatic expansion of novel highs would contradict that scenario. Tracking short-term strength/weakness via novel highs/lows on a daily in addition to several twenty-four hours footing is a useful agency of determining if markets are strengthening or weakening going forward.
Further Reading: A Look at Market Cycles