Taking a Quick Dive into Market Internals

Attached is a chart that compares new 52 week lows on the NYSE against the SPX over the past year+.

A couple of points that should stand out immediately:

1) New 52 week lows continue to trend higher even as SPX prices have been up or flat over the past year

2) The most opportune time to short the SPX has been when new 52 week lows decline to trend-line (1)

3) There was a recent positive divergence in this internal as SPX prices made a lower low in early June vs. May even as new 52 week lows made a lower high, suggestive of the potential for a n-t risk rally which has indeed materialized. This is not dissimilar to what occurred at last June’s lows before the rally into July, which then preceded August’s mini-crash.

Will pay close attention to where we stand on this moving forward – let’s see how the market reacts should new lows approach line (1) again.

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