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Minyan Mailbag: High-Low Indicator


The waiting is the hardest part.


Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.

Hi Kevin,

I thought you might find one of my more reliable indicators useful. It is the 10 day moving average of (NYSE) New Highs - New Lows. Notice the reversal (higher) that recently occurred.

NYSE New Highs - New Lows 10dma vs: S&P 500

Because this indicator uses a moving average, I like to look at the numbers about to be dropped. The last 10 readings are as follows:

The next 3 numbers to be dropped are highlighted. They are very negative numbers which will require even more negative numbers to keep the 10 day moving average from continuing to move up.

This doesn't mean we can't head lower in the short-term - but it would literally take a crash to reverse this indicator down. If we get a string of positive days...this indicator will really accelerate higher (and if the relationship holds, the S&P with it).


Minyan "Astro" Adam

Minyan "Astro" Adam-

The number of new highs made on the NYSE divided by the number of new highs plus new lows plotted on a ten day moving average yields the following point & figure chart:

NYSE High Low Index

This point & figure chart shows what your statistics and line charts say; the High-Low Index is at a very low level from which it will be very difficult to move lower... barring a crash.

That being the case, this chart supports other short-term indicators, such as the percent of stocks above their 50-day moving average, which recently reversed up.

I believe we are in the process of a rally above 1200 - the SPX recently reversed up in a bullish shakeout formation - with natural gravitational pull to 1210, possibly as high as 1240, but that the overall negative context of the market will soon enough exert control over the rally and a larger move down is probable from these potential higher levels. Not advice, but that is the way I am playing it.

No positions in stocks mentioned.

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