Stockcharts blogger Greg Schnell periodically has some nice charts analyzing the market under the hood. He had 2 interesting charts after yesterday’s rally, with his own explanation. Rather than summarize his own conclusions, I’ll leave you to his own words:
So what is the mystery indicator? What it represents is the difference between new highs and new lows. Regular levels of this indicator don’t mean much, but huge highs and huge lows are usually indicative of something.
Anyway, this is the highest reading in 4 years which would lead me to be more cautious here.
His whole post has a couple interesting charts, but this caught my eye yesterday as well. The new highs posted across the market yesterday indicated a broadening out of the recent rally, as many individual issues broke prior highs. Greg is interpreting this as a potentially short-term overbought signal, but it is a point in favor of the bulls for the longer term time frame, as it indicates a healthier rally overall.
Of course, any technically bearish arguments are few and far between at this point. Any future bearish setups will take time to develop, as it’s not prudent to play for a long-term top when a market is at new highs. For the time being, the bulls remain in control.