Yesterday we sent out a report to Bespoke Premium subscribers highlighting the fact that the number of new highs in the S&P 500 was nowhere near the levels it was at last April when the S&P 500 was at similar levels. Normally, a narrowing in the number of new highs is considered a negative divergence.
In the report, however, we highlighted the fact that more than 25% of the stocks in the S&P 500 were within 3% of their 52-week highs. We went on to note that "it is very likely that if the market manages to exceed last April’s highs by more than a percentage point or two, the expansion in new highs that we have been waiting for would finally materialize."
Today, the S&P 500 rallied 1.8% to 1,395, putting the index nearly 2.0% above last Spring's intraday high. Sure enough, the number of new highs in the index rose above 10% for the first time this year. In fact, in today's rally, 14.8% of the stocks in the S&P 500 hit new 52-week highs. This is the highest daily reading since 5/2/11, when the S&P 500 made its 2011 intraday high of 1,370.58. We're still not quite seeing the number of new highs that we were seeing in early 2011, but at least this indicator is now moving in the right direction.