We Need To See Some Net New Highs

I know everyone hates to hear this but we are all participants in a market of stocks, and not just a stock market. It's cliché I know, but get over it. We always say Dow this, S&P that, Nasdaq, Russell blah blah. But each of these major averages are made up of a basket of stocks, whether they're 30, or 100, or 500 or 2000 names. So when the averages are making new highs, we want to see the number of individual stocks making new highs increasing as well. When this number is declining in an up market, we know there is underlying weakness in the marketplace.

One thing that has me worried these days is the declining number of Net New Highs as S&Ps and other averages have continued higher. Stockcharts.com has a great tool with the ticker symbol $USHL that takes the number of New Highs in the NYSE plus the number of New Highs in the Nasdaq and then subtracts the new lows in both giving us the total of Net New Highs - Lows.

Look back at what was happening this Spring as the stock market was making new highs but the number of Net New Highs was deteriorating. Boom 10+% correction. Unfortunately we've seen similar action throughout this summer rally.

I know I've been pretty bearish short-term over the last couple of weeks, so this is something we're watching that could change our minds.

Tags: $SPX $QQQ $DJIA $SPY $IWM