New Highs Hit Highest Levels of 2007

Yesterday's reading of net new highs (285) on the New York Stock Exchange hit its highest levels since December 5th of last year.  Some market watchers consider a large increase in the number of new highs to be a sign of market strength.  To test this we found each occurrence since mid 2002 where the net number of NYSE stocks hitting a 52 week high reached its highest point in three months.  As the chart below details, there have only been two periods where the S&P 500 went into a notable decline (5% or more) in the days immediately following a three month peak in new highs.

Comments

[PT]

For this sort of insight, please consider only NYSE issues that are common/preferred stock, not ETFs or closed-end funds, etc. Including all the NYSE issues results in reporting an intensification of any perceived trend.

[Paul Hickey]

PT,

That is a good point in that often times people will include closed end funds and ETFs, but in our analysis, we looked at only common stocks, so that isn't an issue.

Thanks for reading.

Paul

[PT]

Also, the number of new highs is not as meaningful a measure as percentage of issues making a new high. That is because the number of NYSE issues is always growing.

[PT]

Also, to trouble you again, in the press that covers a given exchange, there is almost never a distinction between the stocks for U.S. companies and foreign companies. The values of stocks of foreign companies are subject to being bid up or down simply due to the market's rationalizing foreign exchange trends. It is the health of common stocks for U.S. companies (and for foreign companies that are doing a predominant percentage of their business in the U.S.) that is the best indicator of what Wall Street anticipates about the health of the U.S. economy, etc.