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Yesterday's reading of net new highs (285) on the New York Stock Exchange hit its highest levels since December 5th of last year. Some market watchers consider a large increase in the number of new highs to be a sign of market strength. To test this we found each occurrence since mid 2002 where the net number of NYSE stocks hitting a 52 week high reached its highest point in three months.

As the chart below details, there have only been two periods where the S&P 500 went into a notable decline (5% or more) in the days immediately following a three month peak in new highs.

click to enlarge

net new highs

Source: NYSE Net New Highs Means Downturn Unlikely