Printer Friendly

eMail Article

September 12, 2008

What the New Highs and New Lows are Saying About the Market
by Marty Chenard

New Highs/New Lows Update: Don't forget to watch what is happening on New Highs and New Lows, as they can often be used as Exuberance and Fear indicators.

Most investors have many indicators that they use, but often ignore data from other sources that could confirm or negate the conclusions they drawing about the market.

We will explore two such indicators this morning ... the daily level of New Highs, and New Lows.

Let's start by looking at the 2008 New Highs data. On the New Highs chart, we drew directional lines showing the trend direction on New Highs. Note how the S&P 500 trends relative to the trend of New Highs.

Currently, the New Highs have been dropping, which suggests that the underlying weakness in the market has increased. If the New Highs don't start an up trend soon, then the market will move lower.

New Highs tell a story about investor behavior. Many investors "chase stocks" as they are moving up aggressively.

The more they move up, the more they jump in ... until profit taking occurs, or their fear levels increase.

Then the tide turns and the "chasing activity" diminishes and the number of New Highs start to drop. In one sense, New Highs measures the level of exuberance among investors as a group.

New Lows is another indicator to look at. Spiking levels of New Lows has a definite correlation with sell-offs.

Take a moment to view the correlation between the New Lows and the S&P 500 below.

While New Highs might be associated with investor exuberance levels, New Lows can be associated with investor fear levels and despondency.

Most investors don't sell falling stocks soon enough.

They then are caught in a position where they don't want to take the loss.

Next, they "hope" the stock will come back.

Then, they lose hope and start to panic in the belief that they will lose a lot more. It is at this point where many investors start rushing for the doors and that translates into spiking levels on New Lows.

Note that New Lows have been trending up which is indicating abandonment of stock positions as some investors are losing hope or becoming despondent.

(The New Highs and New Lows charts are posted every day on our paid subscriber site.)

*** Feel free to share this page with others by using the "Send this Page to a Friend" link below.

Do you have a friend or fellow investor that you think would appreciate receiving a link to this page of Today's Analysis"?

If so, simply click on the link below to quickly and easily forward an email link. It is completely private, so we won't even know if you send one.

Send This Page To a Friend

Marty Chenard
StockTiming.com
Asheville, NC 28805
Tel: 828-296-1200

StockTiming.com is dedicated to Stock Market Investors who want the best information on stock charts, stock market trends, stock market timing and technical analysis.

Be My Guest and Take Advantage of Our Free Membership ... Get a Free Membership to StockTiming.com ... Youll receive important daily messages before the market opens and direct links to todays important web pages. Information and messages that are often not posted on our website. There is no obligation or expectation on our part ... it is just our way of proving our accuracy and timing expertise to you. Please click here for your Free Membership.

Copyright © 2006-2008 Marty Chenard

Image rendition and html coding Copyright © 2000-2008 SafeHaven.com

« BullionVault.com -- Buy gold online - quickly, safely and at low prices »
« Honest Money: A History of U.S. Gold & Silver Currency -- by Douglas V. Gnazzo »

« Opinions expressed at SafeHaven are those of the individual authors and do not necessarily represent the opinion of SafeHaven or its management. Articles are available via RSS/XML. Please visit RSSHelp for instructions. »