We Haven't Seen a Rise in the Number of Stocks Making New Highs on the NYSE in Two Weeks

The Market

I want to go back to something I touched on last night: the number of stocks making new highs. I noted that it is concerning that we have not seen an increase in two weeks on the NYSE. Nasdaq is really no different.

I thought of this today as I went through my stock charts. The three arrows on the chart represent the three rallies we have had that came after short-term dips. The first time new highs increased and I praised that fact. The second time I did not fuss too loudly but on the third try it’s more pronounced.

The reason we care is because this tells us what individual stocks are doing. And what it says is those that were making new highs three weeks ago are no longer doing so. If they were, we’d see that number increase or at least stay the same.

Let’s translate this into an individual stock. Let’s use a hot name like Twilio (TWLO) . The red arrow on the left shows you the new high up out of that consolidation. That’s the day the new highs increased to $132. The next arrow shows you that this stock got marked as a new high but in reality it was maybe a buck or two higher, that was it. Tuesday there was no new high and it was the same place it had been two weeks prior. Now I know it was earnings that crushed it today, but this is why we care about the number of stocks making new highs. You want it expanding not contracting.

Now forget the hot stocks and look at the non-hot stocks and you will find ones that are even more obvious on that score. More new highs mean more opportunity to make money on the long side. Fewer means less.

As for today, once again breadth was great but new highs dropped off again. But today is more about sentiment. The Daily Sentiment Index (DSI) pushed to 79. So close to 80 but it couldn’t do it in the end. Either way I’d say in this case it’s close enough.

Why? Because the 10 day moving average of the equity put/call ratio dipped under 60%. That is not the holy grail but with the exception of the fall of 2017 dipping under 60% and then reversing back up (which we have not seen yet) has produced a pullback.

I do think we should see volatility pick up in the next week.

New Ideas

To the person who asked about Disney (DIS) last week, it has now backed off to $109 and got a little oversold so the risk/reward is better since a stop under $109 is what I’d use.

Speaking of charts that haven’t gone anywhere in weeks, the OIH chart that we looked at last night is one of them. It is the same price it was a month ago and it couldn’t hold a rally today. This despite everyone being so bullish on oil. The Daily Sentiment Index for oil tagged 80 today.

Today’s Indicator

The Volume Indicator is overbought.

Q&A/Reader’s Feedback

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XME needs to hold this line. As long as it can do that then it has a chance of rallying to $32. I know that sounds ridiculous but I think that resistance at $32 is going to take quite a bit to get through. It will need more work. If it trades under that line then I think I might take another look at it around $28.

We have looked at NIO (NIO) a few times and it is working on a base. I would think somewhere between here and $7 it should have another rally attempt. I would like it if it would spend a week or two just milling around between $7 and $7.50 since it would give it more time to launch a better rally.

Verizon (VZ) looks like a big top so of course it won’t be one! I would like to see the chart map out as I have drawn in blue. If it can do that, then VZ improves the chances of a breakout over that line, making the last few months look like a consolidation than a top. Clearly a move under 52 and the top is complete.