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Stocks Relative To 52 Week Highs Show Fading Participation

  • Written by Syndicated Publisher No Comments Comments
    September 23, 2013

    When looking at a chart that shows new 52-week highs and lows, have you ever wondered what is happening with all the other stocks in the index? Where are they in relation to their 52-week high-low range? DecisionPoint.com’s “Rel-to-52” index provides that answer.

    DecisionPoint.com tracks each stock in the S&P 500 Index and determines the location of its current price in relation to its 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). For example, a stock in the middle of its 52-week range would get a “Rel-to-52” value of 50. The charts below show the average “Rel-to-52” for all the stocks in the S&P 500 Index.————————–
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    The most recent Rel-to-52 reading is 80, which means that on average S&P 500 stocks are within 20% of their 52-week high. This shows a lot of strength behind the recent rally; however, in the last four months the Rel-to-52 index has made a series of lower tops (a negative divergence), giving evidence that support for the rally is fading.

    Screen shot 2013-09-20 at 10.09.12 AM

    The current negative divergence is not nearly as profound as the one that formed at the 2007 bull market top, but it is a problem nevertheless. Another problem is that the Rel-to-52 index is currently in the zone where we would consider it to be overbought, and because of this we will typically see Rel-to-52 tops corresponding with price tops. It is simply a matter of cyclical behavior where things get as good as they are going to get, then they swing back in the other direction.

    Screen shot 2013-09-20 at 10.07.52 AM

    Conclusion:  DecisionPoint.com’s Rel-to-52 index provides a unique, precise analysis of 52-week high and low status of all stocks in the S&P 500 index. It is currently overbought and presenting a negative divergence, so it is likely that the market will soon roll over into a correction. We have no reason to believe it will be a particularly severe correction, but we certainly think one is due.

    Images: Flickr (licence attribution)

    About The Author – Carl Swenlin, Decision Point

    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.