The market closed last Friday registering the second most New High’s (NH’s) recorded in a database that I have going back decades. At 634 NH’s, it’s the most new highs registered on one day in almost 30 years. More than any one day during the dot com boom of the late 1990’s, more than any day recorded during the run in 1987 and more than anything this millennium.

Only one other date surpasses Friday’s total: Monday, October 11, 1982 when the DJIA closed at 1,072.79. The market recorded 653 NH’s, 7 NL’s, 1,504 advances, 292 decliners and “up” volume outpaced “down” volume by an almost 10-1 ratio.

The NASDAQ closed at 202.31 on the same day with 418 NH’s, 14 NL’s (not even in the top 10 for the highest number of NH’s ever recorded). Do note this: the highest NASDAQ reading ever came later that year on Thursday, November 4, 1982 with 525 NH’s (following that week’s election day).

So what does this all mean? Well, by mid-1983, the market surged higher by 20%. It continued to move higher until the crash in 1987 but long term, the market is up well over 10-fold since this NH extreme.

How about today’s market? I can only tell you this: we are in an up-trend as of today and until the market breaks that trend, do not try to “guess” when it will reverse.

I have my “opinions” of the market but as you all know, we must trade what is actually happening, not what we think should be happening. Yes, I am concerned the market would like to correct longer term based on poor economic policies, tremendous debt levels, a depreciating dollar and most important: possible inflation. But, until we get the true catalyst, trade what the market is telling you.

The 634 NH’s represents an extreme in the market and I will be watching for further catalysts. How long can this market sustain higher stock prices based on faulty growth? You can only take so many cash advances on your credit cards without paying before they cut off your borrowing capacity. Maybe I have it all wrong but I am concerned long term. Short term, the market is higher unless it says otherwise.

I leave you with this: the vast number of “gap-ups” in stocks making new highs concerns me. Do they want to fill? If so, we will have an almost endless supply of high quality shorts to trade.

Chart provided courtesy of www.Decisionpoint.com

The data in the below tables are compiled for the NASDAQ dating back to the 1970’s. I will admit that it doesn’t go back to day 1 in 1971 but it covers more than 30 years of new highs and new lows. Follow me nightly and weekly on twitter for my latest updates using this data in real time: Follow Me On Twitter

NASDAQ All-time
This first table shows us that seven of the top ten days with the most new highs came during the bull run of the 1990’s. The top day, Thursday, November 4, 1982 gave us the most NH’s all-time for the NASDAQ with 525 (only 13 new lows). The NH/NL 10-d MA Diff was 222, the NH/NL 30-d MA Diff was 196, the Adv-Dec Ratio was 1,087-469 and the NASDAQ closed at 225.01, up 1% for the day. The stock market bottomed on August 12, 1982 and rose 35 percent by the end of the year as we can see in the powerful NH/NL ratio averages listed above. The NH/NL 10-d MA Diff switched from negative to positive on Thursday, August 26, 1982 and never looked back (the tally was 180-15 that day); this was also the first day the NASDAQ NH/NL Diff popped above 100 since May that year. Talk about a market timer.

NASDAQ – 2009
The list from 2009 is freshest in our minds because it’s present day data. All but one of the top ten NH days for the NASDAQ happened last month with the 10th day happening at the end of June. It’s interesting because the ratio is getting stronger but the leaders aren’t cooperating and we aren’t “blasting-off” with 200 & 300+ NH’s as we did in the 1982 bull, the 1991 bull, the 2003 bull or the bulls of the mid and late 1990’s.

NASDAQ – 2008
We only logged three days above 100 NH’s in 2008, enough said. If you didn’t sell your long holdings and were still trying to pick a bottom, pay attention to this data next time; you won’t get hurt so badly!

NASDAQ – 2007
The NH/NL moving averages sunk deep into the red by the fall of 2007, giving every investor the opportunity to lock in gains and prepare for the ensuing bear market. I’ve already “tooted” my own horn for writing multiple blog posts to lock in gains on this site in late 2007 and early 2008 (see here: Calling Tops and Bottoms: Trend Changes). More articles are listed below. The NH/NL 10-d MA Diff went negative on Tuesday, October 23, 2007, 10 trading days before the NASDAQ’s ultimate top. The index went on to drop more than 40% in one year and 55% to the bottom. Once again, pinpoint accuracy for the NH/NL data.

List of articles on NH/NL Data:

• NH NL picks Market Tops and Bottoms
• Calling Tops and Bottoms: Trend Changes
• New High New Low Data
• Market Breadth
• New High New Low (NH-NL) Chart

NASDAQ – 2006
Not much to talk about in 2006 – it was an average year with ups and downs but nothing drastic and not too much trending using this indicator. A drop in the markets took place in the summer of ’06 which the NH/NL’s picked up.

NASDAQ – 2005
This year was similar to 2006 as the NH/NL data was fairly quiet with no extremes in either direction.

NASDAQ – 2004
This year’s NH/NL data started off extremely strong with the second highest NH daily total ever for the NASDAQ. Nine of the top ten NH days came in January as the bull market of 2003 (recovery from bubble burst) was coming to an end. The market reached a top in January and didn’t surpass these levels until the following winter. January of 2004 gave us 6 days with a NH/NL 10-d MA Diff above 300, 5% of the total number of times this has happened to the NASDAQ over the past 30 years (128 total times).

NASDAQ – 2003
The bull market of 2003 gave us some of the strongest overall (average) NH readings of all-time. Wednesday, September 3, 2003 is the 8th highest daily total ever (only 2 NL’s that day for a 99% NH/NL ratio rating). The NH/NL 10-d MA Diff turned positive for the first time on Wednesday, March 26, 2003 while the NH/NL 30-d MA Diff turned positive on Tuesday, April 8, 2003. The up-trend started in March and blasted off in April, once again proving that the NH/NL data is pinpoint accurate – better than any stochastic, oscillator or other market tool available. We can’t argue with history.

In closing, the difference between the past turning points and 2009’s turning point is that the former up-trends quickly showed many consecutive days of more than 100+ NH’s, soon to be 200+ NH’s per day. This year has failed to do that time and time again. Until it does, we’ll wait patiently and continue to watch the data, looking to pounce on the signal!

I hope you enjoyed this historical and educational post. If so, follow me on twitter for my nightly and weekly updates (the NH/NL data is the majority of my focus along with individual growth stocks): Follow Me On Twitter

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Market Breadth using the New High New Low ratio and the Cumulative Advance Decline line for the NYSE and NASDAQ.
I’ll let the charts do the talking…

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I am once again focusing my energy on the New High New Low (NH/NL) data as it is historically the most accurate indicator in the market. No indicator is as valuable as this tool. What I have done today is charted the 10-d/30-d MA Diff to show you a major crossover that occurred in March 2009. The exact date of the crossover was March 18, 2009; the NASDAQ is actually up more than 26% since that day. Not a bad trading strategy but I will admit it’s not one that comes around often. The second and third charts show the NH/NL differential and the NH/NL 10-d ma diff.

As I said in the post NH NL Picks Market Tops and Bottoms:

Consistent Nasdaq readings above 100-200+ will be the official confirmation to grab and add shares for trend traders!

That’s what I am looking for! Until that happens, a “true” up-trend is not sustainable. The up and down whipsawing of the past several month is what we can continue to expect until we see consistent readings in the triple digits.

Do you really want to know how to pick market tops and bottoms? Really?

Well, you don’t need a crystal ball, you don’t need any Wall Street guru’s, you certainly don’t need fancy computer software and you can simply ignore the talking heads. It’s that easy. Maybe we won’t pick absolute tops and bottoms but we can identify trends as they begin to develop.

You just need to follow the action among the individual stocks in the market! Learn to focus on the number of stocks making new highs versus the number of stocks making new lows. It’s been the true crystal ball in my method since I started to turn a consistent profit in 2002. It’s the backbone of my trend following methods.

The NH-NL Differential is simply the number of stocks making new highs minus the number of stocks making new lows.

I follow the progress of stocks making new highs and new lows on the NASDAQ and NYSE and pay specific attention to turning points in the differential. I am not so interested in the extreme highs or lows of the ratio but rather changes in trend from positive to negative and negative to positive over a period of time.

The yearly Nasdaq New Highs and New Lows (Differential) are captured in my charts below, dating back 10 years. With many market pundits (or talking heads) saying that we may have reached a bottom, I felt it was time to do some homework and study the past charts so we know what to look for in 2009. It is true that the trend seems to be changing but we aren’t quite there yet. Focus on 2002 and 2003 to get an idea of what we may see if this market decides to make a true up-trending run, one that’s sustainable.

Consistent Nasdaq readings above 100-200+ will be the official confirmation to grab and add shares for trend traders!

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