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Many Divergences Not Confirming S&P500 Highs!

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    September 30, 2012

    Decision Point tracks each stock in a given market index and determines the location of its current price in relation to the 52-week high and 52-week low. We express this relationship using a scale of zero (at the 52-week low) to 100 (at the 52-week high). A stock in the middle of its 52-week range would get a “Rel-to-52” value of 50.

    (This is an excerpt from recent blogs for Decision Point subscribers.)

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    The chart below shows the average Rel-to-52 for all the stocks in the S&P 500 (we measure the Rel-to-52 of each stock in the S&P 500 and average the results). We can see that the recent price highs were not confirmed by the Rel-to-52 Index, which means that there are fewer stocks pushing into the high side of the envelope.


    It is interesting to note that the number of new highs (below) at the recent price high greatly exceeded the number of new highs at the tops earlier this year, thus confirming the price move, but the Rel-to-52 Index doesn’t back that up.

    Screen shot 2012-09-28 at 12.25.09 PM

    To be sure, the Rel-to-52 is not extraordinarily weak, but it joins quite a few other indicators showing negative divergences.

    Images: Flickr (licence attribution)

    About The Author

    Carl SwenlinCarl Swenlin is a self-taught technical analyst, who has been involved in market analysis since 1981. A pioneer in the creation of online technical resources, he is president and founder of DecisionPoint.com, a premier technical analysis website specializing in stock market indicators, charting, and focused research reports. Mr. Swenlin is a Member of the Market Technicians Association.