New Highs and Lows
The number of stocks reaching new highs and new lows is sometimes used as a tool to facilitate market timing. Current data on new highs and new lows can be found on various sites on the internet.
When the number of new highs is going up along with the market, it indicates a confirmation of the uptrend. However, when the number of new highs starts decreasing while the index is still going up, it indicates a weakening of the trend and might be a precursor to a reversal of trend from bullish to bearish.
When the number of new lows is going up along while the market is declining, it indicates a confirmation of the downtrend. However, when the number of new lows starts decreasing while the index is still going down, it indicates a weakening of the trend and might be a precursor to a reversal of trend from bearish to bullish.
Indicators help us to understand the health of the market and the state of the market. One indicator does not generally tell the whole story, so it helps to look at a number of indicators and meld them to form our opinion of the market.
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