Knowing the Market's Pulse ...

Last week we discussed the rules for using the NYSE's New Lows.   In Part 1 below, we repeat last week's rules and update for reference, and this is then followed by Part 2 below which is the update for today.

Part 1:  Being a good technician requires more than having proprietary models for trading the markets.   It is also necessary to understand what is "under the hood" of the market at any point in time.

There are over 9 important "under the hood" data readings that we look at each day in addition to our market models.  

One of those readings is what is happening to the daily New Lows on the New York Stock Exchange. There are two horizontal line levels that we have marked on the first chart seen below.

The first is a thick, dark black horizontal line.  It is set at a value of 50, and the other is a blue dotted horizontal line that is set at a value of 150.  

Here is how to get a "reading" from the Daily New Lows:

1. When the New Lows are below 50 the market has a positive bias.  When the New Lows are below 25, the market has a strong positive bias.

2.   Above 50, is a market weakness and negative alert condition. 

3.  When above 150, you run into the danger of "panic selling" where some serious damage is done to portfolios.

At 10:25 AM (EST) on May 9th, the reading was at 62 so it was saying that there was a condition of market weakness and a "negative alert condition". 

The key to using data like this, is that it needs to be used in conjunction with other data series to get the whole picture.   If you are putting a puzzle together, one piece never gives you the whole picture, but a multitude of "connected" puzzle pieces can give you a real good idea of what the puzzle's image is. 

With that in mind, the New York Stock Exchange's daily New Lows is a good puzzle piece to add to your repertoire.

Part 2:  Here we are a week later, and this chart shows the value of the NYSE's New Lows at the close yesterday.

Yesterday showed a count of 123, so from the above rules, we know that:

(2.)  Above 50, is a market weakness and negative alert condition. 
(3.)  When above 150, you run into the danger of "panic selling" where some serious damage is done to portfolios.

We were above 50 last week, and now we are concerningly close to 150 ... only 27 stocks away, so be very careful.

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