Is this Indicator saying that an Important Market Decision will happen soon?
Today's chart shows the daily "New Highs" for the New York Stock Exchange. We update it every morning before the open so that investors can see the trend changes.
On this chart, a minimum of 100 is a very important level in a rally. 150 is what I want to see. Below 50, I start to get concerned, and below 25 is very unhealthy.
We won't focus on those numbers today, and instead, we will focus on what a Stochastic-Momentum Oscillator Indicator is showing over a year+ period of time.
First, realize that rising New Highs supports a rising new market rally condition. Think about it ... As more and more investors chase strong stocks, they push them higher and higher, and thus the number of New Highs increases in numbers.
But what happens when they become overpriced, or the underlying stock experiences deteriorating fundamentals? Eventually, there will be a point where one cycle will give way to another, producing a reversal in the market.
If you are thinking about it ... No, New Highs are not a leading indicator, but they sure provide a reality check about where the market is relative to its cycle.
Today's chart requires no explanation. What is clear, is that the cycle of increasing New Highs is on a downtrend and will get into some serious trouble if the cycle does not get revived to the upside fairly soon.
If you look at the S&P 500 portion of the chart, you can see that the index has essentially moved sideways since the beginning of the year. That sideways pause in the Bull Market is really a consolidation resting period from which an upside or downside breakout will occur at the end of the sideways movement.
That is why it is so important for the Stochastic Momentum Oscillator to now start a new upside move, which would mean the market would break out to the upside.
Currently, the Oscillator's red/blue trend lines are merged, so you don't know what direction the breakout will be yet ... but still, the merging of the indicator lines is saying that the decision will be made fairly soon.
