The most recent flare-up of new lows we experienced from the other week has already disappeared, and it appears that they are retreating into hibernation once again, as only 0.8% of S&P 500 stocks are at 1-month lows.
Here’s the chart:
(right-click and open image in new tab to zoom in)
Let's break down what the chart shows:
The blue line in the top panel shows the price of the S&P 500 index.
The black line at the bottom represents the percentage of S&P 500 stocks at 1-month lows.
The Takeaway: Over the past two years, we have seen deterioration in the new lows list characterized by lower highs, while the S&P 500 index keeps posting higher highs and higher lows in price. This is exactly what you expect to see during a bull market.
With only 0.8% of S&P 500 stocks hitting 1-month lows, it is virtually impossible to enter a bear market or experience a significant correction without the presence of new lows.
Until we see a surge in the new lows list that changes the pattern of the lower highs, we won’t be anticipating any real selling pressure for the stock market.
