Monday, February 23, 2009

52-Week New High/New Low

Every once in a while I stumble across somebody trying to bludgeon some bit of random market data into a useful indicator. More often than not, one wonders if the person invested hours torturing the data only to have it confess to... nothing, and then they decided to just make a pretty picture out of it, gloss over the details and call it a day. Because to waste a few hours discovering something doesn't work would be embarrassing or something.

Which isn't really true at all. Discovering something has no utility is a valid result and should be reported. Trying to tart up a chart and make it sing and dance is basically a Type I error. I've always been slightly annoyed that scientists are only concerned with publishing positive results. As though the experiments that were dead-ends were invalid. All information contributes to our total knowledge, and this includes what doesn't work as well as what does. But enough soap-boxing...

At any rate, I present the following two pieces of market trivia: the charts of the 52-week New Highs and New Lows against SPX. I've never found them to be particularly useful as a predictor of anything though I have seen a few attempts to do so in a chart (no numbers/correlation, natch) and quite often the counts appear in some random market commentary that always seems to me to smack of a certain "insiderism" for lack of a better term. Basically, a random piece of trivia that an outsider would have no reason to know.

So here are some Fun Facts about these charts. Since October 2008, there have never been more than 20 new 52-week highs and in fact, since January no day has seen more than 15. In contrast, well look at the new 52-week low chart. The November low area is an abject disaster. Since the New Year, the average number of new 52-week highs has been 6.23 and new lows has been 98.97. Ouch. I've never had much luck getting these charts to tell me much of anything though to be honest, my effort has been cursory at best after my initial attempts. Still, I bring these up because I read a bullish note today that pointed out that the current number of lows is below the November timeframe. To me, that's a lot like saying the patient won't lose much more blood through a cut on the arm because the blood pressure has fallen too precipitously due to a sucking chest wound. But I've never been accused of being a sunny person.

Other details: this is the NASDAQ 52-week high/low and not the NYSE. NYSE has too many preferred shares and other odd issues that tend to make a mess of the numbers and are too annoying to deal with. If anyone has some alternative ideas, I'd be interested to hear them.


Zach said...

For the New High New Low indicator, where did you get your NHNL data?

Mr.Sparkle said...

WSJ. It's buried somewhere in the data section but to be honest, it's been a long time since I checked this out so it could very well have disappeared.