Today’s Chart Of The Day looks at a phenomenon that we’ve highlighted in the past on several occasions and which we have termed, “the Junkie Market”. The idea is a simpler offshoot of the notorious “Hindenburgh Omen”. Essentially, it describes a condition in which there are relatively large numbers of both new 52-week lows and new 52-week highs. In the past, such occasions have often occurred within close proximity of market tops.
As today’s chart reveals, we just experienced a relatively elevated number of both new highs and new lows – over 100 to be exact – on both the NYSE and Nasdaq exchanges.
As the chart shows, similar past occurrences, at times, took place near important market tops. So is the current episode indicative of a market top? Or will the market trample over this phenomenon as it has most “red flags” in recent years?
In a Premium Post at The Lyons Share, we discuss the potential rationale why these conditions may be a bad omen for the market. We also take a quantitative look at the historical, post-signal performance of the stock market to see just how much, and how reliable, of a warning such conditions have been.
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Disclaimer: JLFMI’s actual investment decisions are based on our proprietary models. The conclusions based on the study in this letter may or may not be consistent with JLFMI’s actual investment posture at any given time. Additionally, the commentary provided here is for informational purposes only and should not be taken as a recommendation to invest in any specific securities or according to any specific methodologies. Proper due diligence should be performed before investing in any investment vehicle. There is a risk of loss involved in all investments.
The SPDR S&P 500 ETF Trust (SPY) closed at $290.88 on Friday, up $0.05 (+0.02%). Year-to-date, SPY has gained 9.44%.
This article is brought to you courtesy of Dana Lyons, JLFMI and My401kPro.