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Internal selling pressure

One of the most important indications of internal strength or weakness on the NYSE is the number of stocks making new 52-week highs and lows.  It definitely pays to follow the new highs/new lows each day to gauge whether the buyers or the sellers have the upper hand.

Whenever the number of stocks making new lows exceeds 40 it tends to indicate internal weakness, especially when this trend continues for more than say 3-4 days in a row.  One of the things I'm watching right now is the expansion in the number of new 52-week lows, which has been above 40 for the last three trading sessions.
 
As I mentioned recently, investors might want to consider scaling back in their commitments until the internal trend shows clear signs of improving.  That would entail a reduction in the number of stocks making new lows, preferably below 40 per day. 
 
[Excerpted from the 7/27/11 issue of Clif Droke's Momentum Strategies Report]