Surge in New Highs

New highs surged higher Wednesday on both a short and long-term time frame. New 20-day highs jumped to over 3,000, sending the raw 20-day high-low index over 90%. The high-low index is calculated by dividing new highs by the sum of new highs and new lows. The raw daily numbers are then typically smoothed with a 10-day moving average. This is what’s usually referenced when technicians speak of the high-low index, and it’s usually based on 52-week highs and lows. You can see both the raw number as well as the moving average on this daily chart. I’ve found the raw number helpful when analyzing the 20-day data as it can highlight days of unusually lopsided action. Wednesday was a good example, with over 3,000 new 20-day highs and less than 300 new 20-day lows, sending the high-low index over 90%. Historically, one-day readings over 90% usually means the S&P will hover near unchanged levels the next day, with upside potential limited to 0.5%. Here’s a look at each of the last 30 instances in which the raw high-low index crossed 90%…

New 20-day High-Low Index (Raw Daily #) Hits 90%+
10/13/10… S&P500 ??? next session
09/20/10… S&P500 -0.3% next session
09/13/10… S&P500 -0.1% next session
08/02/10… S&P500 -0.5% next session
07/26/10… S&P500 -0.1% next session
03/17/10… S&P500 -0.0% next session
03/12/10… S&P500 +0.1% next session
03/05/10… S&P500 -0.0% next session
03/02/10… S&P500 +0.0% next session
01/11/10… S&P500 -0.9% next session
01/04/10… S&P500 +0.3% next session
09/22/09… S&P500 -1.0% next session
09/15/09… S&P500 +1.5%  next session (*)
09/10/09… S&P500 -0.1% next session
07/30/09… S&P500 +0.1% next session
07/23/09… S&P500 +0.3% next session
07/20/09… S&P500 +0.4% next session
07/16/09… S&P500 -0.0% next session
06/04/09… S&P500 -0.3% next session
06/01/09… S&P500 +0.2% next session
05/08/09… S&P500 -2.2% next session
05/04/09… S&P500 -0.4% next session
04/29/09… S&P500 -0.1% next session
04/16/09… S&P500 +0.5% next session
04/09/09… S&P500 +0.3% next session
04/02/09… S&P500 +1.0%  next session (*)
03/23/09… S&P500 -2.0% next session
03/19/09… S&P500 -2.0% next session
01/02/09… S&P500 -0.5% next session
07/03/06… S&P500 -0.7% next session
01/09/06… S&P500 -0.0% next session

Note that in only 2 cases out of the last 30 occurrences, or 7% of the time, did the S&P gain more than 0.5% the next day. That’s well below the 28% random chance for a gain of more than 0.5% one day later in the same time frame. Of course, in only 5 cases did the S&P lose more than 0.5% the next day, meaning the market was about three times as likely to hold near unchanged levels.

The number of new 52-week highs on the NYSE surged to over 400 issues Wednesday. When the number of new highs has exceeded this level in the past, we’ve typically seen upside follow-through over the intermediate-term. Every instance in which the number of new 52-week highs exceeded 400 for the first time in at least a month are listed in the table below. Note that out of 20 occurrences, 16 led to a higher S&P thirty days later…

New 52-week Highs >400 First Time in a Month
10/13/10… S&P500 ???  thirty sessions later
03/05/10… S&P500 +5.2% thirty sessions later
12/28/09… S&P500 -5.3% thirty sessions later
10/14/09… S&P500 +1.7% thirty sessions later
05/31/07… S&P500 +1.4% thirty sessions later
04/16/07… S&P500 +3.4% thirty sessions later
02/01/07… S&P500 -4.1% thirty sessions later
12/04/06… S&P500 +1.5% thirty sessions later
10/26/06… S&P500 +1.5% thirty sessions later
01/27/06… S&P500 +0.0% thirty sessions later
07/11/05… S&P500 +0.2% thirty sessions later
02/04/05… S&P500 -1.6% thirty sessions later
11/04/04… S&P500 +2.8% thirty sessions later
09/02/03… S&P500 +2.7% thirty sessions later
05/27/03… S&P500 +5.3% thirty sessions later
09/16/97… S&P500 -2.5% thirty sessions later
06/12/97… S&P500 +6.3% thirty sessions later
02/18/86… S&P500 +6.0% thirty sessions later
05/20/85… S&P500 +1.2% thirty sessions later
10/07/82… S&P500 +7.4% thirty sessions later
02/20/76… S&P500 +0.2% thirty sessions later

Categories : Archived EOD Commentary, End-of-Day Commentary

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