New Highs Tie Record For Futility
The absence of ANY New Highs today also contributed to a dubious trendline break.
Apparently it took the dog days of summer to break the stock market out of its duldrums. Go figure. The past 2 days in particular saw various indices break down out of the tight range that has characterized the past 6 months. The selling pressure was so pronounced that it has generated oversold metrics that are not only extreme relative to the recent placid market, but also on an absolute historical basis as well. The action in many of the indices as well as the readings on many indicators would have made worthy Charts Of The Day today. In the end, we went with a couple charts pertaining to New Highs and New Lows on the NYSE.
First off, the number of reported issues on the NYSE that made a new 52-week high today was…0. That’s right, ZERO, none, nada, goose egg.
If you thought it strange to see such a reading, you are correct. During the 2008-2009 panic selloff, there were 13 such days. However, besides that period, there has been just 1 other occurrence (8/8/2011) since 1978. In all, there have been just 50 such occurrences, with the majority of those coming during the early 1970′s. So this is a rare development.
Even more odd, as indicated on the chart, are the circumstances surrounding our present instance. Despite the absence of a single NYSE New High, the S&P 500 closed just 7.5% below its 52-week high. Of the previous 50 instances, the closest proximity of the
S&P 500
to its 52-week high was 10% on 8/6/1971. And the median distance of the S&P 500 from its 52-week high among the prior 50 occurrences was 31%.
The point is there has been remarkably little damage done to the main averages for such an extreme, washed-out breadth reading. One may certainly argue that the fact that the S&P 500 has held up so well in the face of broad deterioration bodes well for its prospects going forward. The other camp would say there is considerable risk that the major averages can no longer fight the tide and are ultimately dragged down by the broad internal weakness. For what it’s worth, we would favor the stance of the latter camp.
On the other end of the spectrum, the number of new lows accelerated again this week. Today’s reading near 600 approached the lows seen last October. And the differential between the highs and lows today struck a significant milestone. On July 28, we last noted the series of higher lows in the NYSE New High-Low differential, beginning in 2008. The UP trendline from that point connecting the lows in October 2011 and October 2014 was again being tested.
We noted in that post that it was “Bounce Or Else” for the indicator. The indicator and the market did bounce that day, and for the next few weeks. Today, it wasn’t so lucky.
So what does this trend break mean. As we wrote in the July post, “a violation of the post-2008 UP trendline in NYSE New Highs-New Lows will be…one of the first indications that the persistence of the post-2009 cyclical bull market is in serious jeopardy.” I will emphasize that trend breaks in this series, like those near the cyclical tops in 2001 and 2007 often occur concurrent with short-term washouts. Therefore, a meaningful bounce in stocks is not out of the question. However, this trendline break may have seriously negative ramifications in the longer-term.
_____________
“A Little Surprise Coming” photo from this Tom Gill.
More from Dana Lyons, JLFMI and My401kPro.
The commentary included in this blog is provided for informational purposes only. It does not constitute a recommendation to invest in any specific investment product or service. Proper due diligence should be performed before investing in any investment vehicle. There is a risk of loss involved in all investments.
