In a paper entitled “An Exploration of the Nature of Bull Market Tops” by Lowrys Research, written in 2006, we learned that in previous stock market tops, the day of the top saw only a few stocks in the major indexes hitting new highs. Most of the constituents were down and many were down more than 20% from their highs. Contrast that to a major bottom when almost all the stocks are at or near their lows.
That brings us to Tuesday the 26th, when the Nasdaq 100 hit a new high. How many stocks closed at new highs? If you answered three, you are right. How many are at least -10% off their highs? If you said 51, then you are once again a winner. And what about stocks that are at least -20% off their highs? That answer is 19. So almost 20% of the index is at least -20% off their highs, 51% of the index is at least -10% off their highs, and only 3% of the index is at new highs. The average stock in the Nasdaq 100 is off -12.76% from its 52-week high. Is that the sign of strength that you were looking for?
Lets look at another index that should be a harbinger of things to come in the economy, the S&P100. Also known as the OEX, the S&P100 is the mega-cap index that looks at 100 of the largest companies in the S&P500.
With the S&P100 trading just -2.3% off its cycle highs, how is the breadth here? Is the Nasdaq 100 just experiencing a tech sell off or is it more widespread? Well, 39% of the S&P100 is off at least -10% and 9% is off at least -20%. A better showing than the Nasdaq 100, but not exactly "New Highs R Us" either. How many of the stocks hit new highs Tuesday? Only Apple (AAPL). The average stock of the S&P100 is off -9.35% from its 52-week high.
In the following table, you can see the Nasdaq 100 and the S&P100 side by side. In the 52-week high column, you will see the 52-week high on a close basis as of Monday the 25th. In the "% From 52-High" column. you see how far off the 52-week high the stock is. In the case of AAPL and a few others, they are blue and have positive reading denoting a new 52-week high made on Tuesday the 26th. Finally at the bottom is simply the max and the min for each index.
[Click to enlarge]
S&P100 and Nasdaq 100 52-Week High Table