S&P 500 New Highs Expanding... from a Low Base

Back in late February and early March, we made several references to our Bespoke Premium clients that even though the S&P 500 was trading down to new lows, the number of stocks making new lows wasn't expanding, which is very positive for the market. As shown in the chart below, at the October low, 84% of the stocks in the S&P 500 made a new low. Then in November, 63% of stocks hit new lows. At the March low, however, only 36% of the stocks in the S&P 500 made new lows.

click to enlarge

Just as the smaller number of stocks making new lows shrunk towards the end of the bear market, as the market rises, investors should be looking for an expansion in the number of stocks making new highs. As shown in the above chart, new highs are expanding, albeit from a low base. In today's trading, 23 stocks (highlighted below) in the S&P 500 hit a new 52-week high. This is the best daily reading since May 2008. Going forward, if the market continues to rally, investors should watch the new high list for confirmation of the rally. If the new high list fails to keep expanding, it could be an early sign that a correction is in the cards.

Comments

[Mad Hedge Fund Trader]

ooh Fed chairman Ben Bernanke says the recession is “technically” over. This will be great news for the homeless living in the tent city under short finals who I fly over when I land my plane at Buchanan airport. It means “technically” they will eat tonight. It will also be welcome to the 18% of the workforce who are now unemployed in California, the 1.5 million who are losing unemployment benefits in the next three months, and one million college students who ran up and average $30,000 in debt to graduate this year so they could sleep on their parents’ sofa. Traders celebrated the news by running the S&P 500 up to 1,054, a positively nose bleeding 58% above the March 9 low. Apparently, the stock market thinks Obama is the greatest president in history, rising some 40% since the inauguration, compared to a 30% drop during the eight years of Bush rule. That is some report card I wonder what the results will be by 2012 and 2016? The only thing I approve of today is that this love fest took silver to a new high this year of over $17. Wake me up when the party is over, and I’ll drag your drunken carcasses into the car and drive you home. Then I’m going to cash in a couple of my silver dollars and take my significant other out for a Corona and some vegetarian burritos.

2009 Sep 15 08:41 PM

[Mary LaRue]

I must wonder why Bernanke didn't simply state that the recession is over, as opposed to stating that it is "technically" over. He carefully chose his words, which is intriguing to say the least.
Since March, 2009, the media has emphasized the decline in President Obama's ratings twice (March 6, 2009 and the end of July, 2009 when the market was seemingly tanking again. Both times, within a couple of days after the rating talk, the stock market began to rally, based upon "positive" economic data that seemingly changed overnight.
Just a few days ago, President Obama was speaking about his role in strengthening our economy, and how much it has improved since he has become our President.
But no, wait a minute....I can recall a recent interview in which Warren Buffett claimed that rising job losses would prevent an economic rebound. Something is not jiving here.
The lack of consistency in our economic data is questionable, especially in view of its timing. At some point, the truth about our economy will surface.

2009 Sep 19 01:49 PM

[MoeMan929]

Great chart - where do you find this?

2009 Nov 06 10:20 AM