Broad Market Indicator #7: NYSE 52 Week High Low vs. Dow

Building on the post about the NYSE 52 Week Highs/Lows indicator, I will explain why it’s helpful to gauge it against the Dow’s closing numbers each week. This is a simple but effective tool. If the NYSE 52 Week H-L is divergent from the direction of the Dow then we can see signs of a possible change coming. 

This year this gauge flashed a strong indication in the spring. This is where we start to see back to back weeks of negative divergence on the NYSE 52 week H-L even though the Dow was experiencing gains. News at this time was also positive.

I like to create my own charts. See below for an example of the Dow moving higher (green line on top chart) vs. the NYSE 52 week high-low trending lower (red line on bottom chart).

If we examine the current chart from last Friday (Dec 17, 2015) we can see that both the Dow and the NYSE 52 week highs and lows are in negative territory. The Dow is below its 30 week moving average and the NYSE 52 week Hi Low Differential shows the index has more new lows than highs for the last 3 weeks. When the two indicators flash a negative sign, that is worth paying attention to as well. We are in bear land for now.