Tom asks me if I see any weakness and I confess I can only see strength here in both the 52 week new high and 10 day Hi-lo indicators. The Zwieg shows a thrust as strong as the previous thrusts that seem to impart a momentum that is hard to stop. The price action over they last two days though is very worrisome. Strength in the morning followed by selling and those spinning top candles that are being left behind do not look so good. Meanwhile the 52 week New High is gaining momentum. Yesterday, Russell’s 52 Week New High (52WNH) was very strong, and the intraday curve of the NYSE New High indicator showed no indication of weakness.
This morning in the shower I had an obvious revelation, in order for the market to get to new highs it must add the previous new highs (repeaters) to a new collection (newbies). Correct? If the sentiment is that we are going higher the parade of New High symbols should get larger and larger. What are the charts showing us?
(You can always click on these charts to get the full resolution image)
I drew this chart three different times in an attempt to get across my thinking. There are three areas marked on the chart. Each area is a new index high after a pullback. In the last two cases each breakout to a new high was paired to a 52 Week New High indicator that was also making new highs. Our current breakout was made on a lower value of the 52WNH indicator. We should be above 140 but we are only around 100. Where are the missing 40 or so daily 52WNHs?
How is it that the index is making new highs but our parade of symbols is smaller? This indicator is too new to me and I do not have that much data to decide the significance of this divergence. I am looking for weakness beyond the price action and this is what I have found. Yesterday’s 52WNH was lower on the NYSE which happens even while gaining momentum. Two days in a row of a 52WNH would be very suspect on this leg. Today’s Magic Number to turn the indicator down is 43. If we do less the market is seriously damaged. A lower high on the momentum line (Yellow) on the 52WNH indicator is a sign of a correction.
All that being said, the momentum (in my opinion) is still in the Bulls corner and an higher indices are still possible. Watch the resistance values that Tom puts out in http://pv.ttthedge.com and see how we can track above yesterday’s 52 week new highs with our hourly postings in the traders room.
happy trading
-RLT
