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<\/p>\nEvery day, the stock market reveals whether a trend will persist… or reverse.<\/p>\n
In a bull market, a growing number of stocks hit new highs. That’s a great sign of broadening participation in an uptrend.<\/p>\n
But an increasing number of stocks hitting new lows is a major warning signal. That tells you the stock market’s foundation is crumbling, and to be on the lookout for bearish trends.<\/p>\n
In late 2021, the stock market gave an early warning signal that a bear trend was about to be underway. And over the next year, we painfully watched this market trend play out.<\/p>\n
But now an important transition is taking place in 2023…<\/p>\n
“Net new highs” are the daily difference between new, 52-week highs and lows on the major stock exchanges. You can use these differences to track the trend of bull versus bear markets.<\/p>\n
A positive figure means there are more stocks making new highs compared to new lows, while a negative figure means the exact opposite.<\/p>\n
This simple metric can deliver timely insights about the state of the stock market’s trend… and if a change in direction is in store.<\/p>\n
For example, this line flashed a warning before 2022’s bear market ever arrived.<\/p>\n
Here’s the net new highs line (shaded area) along with the S&P 500 Index (blue line) at the end of 2021…<\/p>\n
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A modest 4% pullback in the S&P 500 (black arrow) also saw a huge spike in stocks making new lows (circled area).<\/p>\n
That was a clear signal that participation in the rally was faltering, and ultimately gave way to the bear market.<\/p>\n
But this year, net new highs are starting to tell a different story…<\/p>\n
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Free Trading Resources<\/strong><\/p>\n Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/p><\/div>\n<\/div>\n <\/p>\n Since late 2022, several important developments have taken place in net new highs.<\/p>\n Take a look at the chart…<\/p>\n <\/p>\n First, note the level of net new highs (point A) as the S&P 500 sold off to new lows (point 1). But as the S&P bounced around the lows at point 2, the net new highs figure quickly improved (point B).<\/p>\n In other words, fewer stocks were making new lows. This was a clue that the trend was improving despite weakness in the broader indexes.<\/p>\n And now it looks like 2023 is off to a strong start…<\/p>\n Net new highs are spending most of the year in positive territory (shaded box). That’s notable because the S&P 500 remains 15% below its own 52-week high of 4632.<\/p>\n That’s a sign that the average stock is holding up this year, which is what you need to see during a bullish phase.<\/p>\n For this phase to continue, we need to see further expansion in net new highs across the stock market.<\/p>\n Alternatively, a sudden plunge back into negative territory would be a sign that the bear market is about to assert itself once again.<\/p>\n <\/p>\n Do you think 2023 could be the start of the next bull market trend?<\/p>\nFollow This Expansion in New Highs<\/h2>\n
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