As we saw a positive divergence materialize on the $SPX with New Lows, we thought it a good time to bring out the NYSE New Highs/New Lows chart. It also has a positive divergence between shrinking New Lows and price bottoms that were moving lower. This indicator has been very successful finding market bottoms. Based on the chart below they can come before a long rally or a very short one.
When we expand the timeframe to include the bear market of 2020, you can see that a positive divergence on New Lows arrived at the bear market bottom.
Conclusion: While we aren’t calling this the end of the bear market (definitely not), the current positive divergence is very encouraging as we finish a strong rally day.
Technical Analysis is a windsock, not a crystal ball. –Carl Swenlin
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