A Caution Condition From the NYSE 'New Highs'?
Last week, we discussed how the NYSE "New Highs" were close to being in a "squeeze" condition.
To recap some of last week's comments:
"Conditions are getting close to a decision point on the New York Stock Exchange's daily New Highs. On June 29th, the New Highs had hit a low and started an ascent that lasted until August 2nd. when they peaked and started trending down. ... "It has been a steady down trend, but not a big problem until now. As the New Highs move down, they are approaching a place where a "squeeze" will occur. When that happens, the New Highs will need to start a new up trend or there will be trouble.?
So, what happened during the past week? ... What happen's next? The next 3 charts will answer the questions ...
This first chart shows the past 14 months for perspective.See the next chart ...
This close up chart shows what happened during the past week.
The New Highs show two things ...
First, there were two occasions where the New Highs actually closed above the short term resistance.
Second, yesterday's close was at 110 ... maintaining the daily 100 level is a very important level to maintain for a rally. Historically, below 100 is a high risk level, and below 50 is a real negative level.
See the next chart ...
So, the squeeze is coming close to a climax point.
What about short term biases?
Well the next chart shows a conflict in conditions. Note the two indicators that I added to give clarity to what is going on in the middle of the chart.
What can you observe about the indicators?
- Note that they are both negative, so the downside bias has not ended yet.
- Also note the blue lines I drew on the indicators and price movement on the S&P 500. Notice that there is a positive divergence building up. It isn't strong enough to kick in yet, so conditions are mixed.
Conclusion: In spite of the positive divergence, the downside weakness will not dissipate until the red/blue down trending indicator reverses to an upside trending posture.
(This chart is posted every day in Section 4, Chart 4 on our paid subscriber site.)