That is ... when the market moves higher and higher, stocks make new highs, and more new highs, and then ... more new highs.
What if that wasn't happening?
Well, new highs continue on up higher because investors are chasing particular stocks. If investors aren't chasing stocks, then that says there is a reluctance about the perceived future of the stock(s) being considered.
So, if New Highs weren't moving higher and higher, then that would be a "red flag" that something wasn't quite right.
Today's New Highs chart is below, and it is showing some pretty poor action. Normally, the blue bars continue up, higher and higher in an up trend signifying that stocks are being chased by investors ... and that is a good sign.
However, the current action (seen inside the black box) shows a stalling action which is a reluctance for investors to blindly pay a higher premium. The only reason you would NOT pay a higher premium than the most recent price, is that you don't believe the stock is going higher, or that it won't go high enough to make the risk of purchasing worthwhile.
So, the action on the New Highs is saying that investors are hesitant in believing that stocks will continue to move higher. Until, and unless this changes, this will remain a red flag.