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A Bullish Sign Not Seen By the Naked Eye

Are new highs coming soon? This indicator thinks so

by 7/17/2012 10:11:38 AM
Stocks quoted in this article:

Recently, I noted how strong the internals have been, as the cumulative return of the advance/decline issues at the New York Stock Exchange (NYSE) made another new high. This bodes well for the longer-term viability of the bulls, but this here is yet another nice sign.

In order to make new highs on the overall market, you need a number of individual stocks to also advance to fresh peaks. The more new individual highs, the bigger the probability the new highs on the overall market will stick. One thing I like about the recent action in the new highs versus new lows on stocks at the NYSE is it has steadily been increasing since June. This is a sign of underlying strength not seen in the charts. (Click on the chart below to enlarge).

Click to Enlarge
Chart courtesy of StockCharts.com

Here's the cumulative new highs versus new lows at the NYSE since last March. Nothing wrong with this picture.

Click to Enlarge
Chart courtesy of StockCharts.com

Lastly, here's the same chart, but with the S&P 500 Index (SPX) action as well. As you can see, this made a new high earlier this year right before the SPX broke out. Now this indicator once again moved to new highs, leaving the question to ask -- does the SPX soon follow? History would suggest that could be the case.

Click to Enlarge
Chart courtesy of StockCharts.com

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