Saturday, November 16, 2013

Market Breadth & the 52 week high/low line

I have devoted several posts to detail the importance of using the new 52-week high / low list as a strategy to screen stocks for buy or sell candidates. The new 52-week high / low list can also be used to measure the strength of the prevailing trend.

For example in the NYSE at the close Friday November 15 we had 380 new 52-week highs and only 30 new 52-week lows. During a bear trend the new 52-week high / low list would be reversed new 52-week lows outnumbering the new 52-week highs.

When used as a breadth study we need more than one good day but rather a long series of stocks making new highs. The best approach is to study the cumulative total of new highs less the new lows. This is not the same study of the popular AD line that tracks the net difference between the DAILY advancing and declining issues.

The chart is a weekly of the S&P500 plotted above the weekly cumulative 52-week hi/lo line which smoothed by a 20 period simple moving average. I have marked the two sell and two buy signals issued over the past seven years. When I get a sell signal – you will be the first to know.

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