The Dow Jones hasn’t seen a new all-time high since June 19. But as the Dow Jones’ BEV chart below shows, it closed the week in scoring position, only 0.53% away from a new all-time high. If the bulls are willing, the Dow Jones could see a new all-time high at the close of Monday’s trading. Do they want to?  

We’ll see. But let’s face it, in July 2017 the bulls driving this market are central banks, and I doubt they want to transform the current advance into an all-consuming mania as they did in 2000 or 2007.

Next chart has the Dow Jones plotted along with the NYSE 52Wk H-L Net step sum.

What’s the NYSE 52Wk H-L Net step sum?  In the table below, every time the 52Wk H-L Net is positive it’s a +1; a negative net produces a -1.  And like all step sums, it’s just a single item A-D line that adds the (+ / -) 1s to construct the line; in this case the Red plot above.

The thing that stands out from this data is the frequency the NYSE sees days with more 52Wk Highs than lows. Looking at the red plot above, during the sub-prime mortgage bear market above, the NYSE 52Wk H-L Net step sum declined only from June 2007 to April 2009; less than two years. However, since January 1996, days with more 52Wk Highs than Lows have dominated NYSE.

Look at 20 January 2016 in the table above; the NYSE saw 1,393 new 52Wk Lows and only 3 new 52Wk Highs.  That proved to be an extreme from which the stock market pivoted from a declining to an advancing market.  

Such market extremes are events investors should look for during market declines. Of course, for someone looking at this extreme market event on the evening of January 20, 2016, there was no guarantee that there weren’t even more extreme days pending in the future.

Below I have the daily NYSE 52Wk H-L Ratio plotted.  The ratio is computed by taking the daily NYSE 52Wk H-L Net (see table above) as a percentage of total shares trading (active shares) on the NYSE that day.

The high-tech mania of the late 1990s is an interesting study of the stock market. We see the 52Wk H-L Ratio break below -30% in 1998; two years before the market top.  What happened there? Everything not high-tech began their bear market two years before the high-tech issues did.

Go back to my chart plotting the Dow Jones with the NYSE 52Wk H-L Net step sum (Red Plot).  I placed an egg over this period of market history. Note how the step sum went down (more 52Wk Lows than Highs) during the last two years of the bull market (1998 & 1999), and how the step sum went up (more 52Wk Highs than Lows) during the 2000-2002 high-tech bear market.

What happened there?  Those groups that began their bear markets in 1998 began their recovery in 2000 as the high-tech shares declined for the next two years.  You don’t see that happening every day!  

What’s more typical is what happened during the 2007-09 credit crisis bear market below.  I placed a square over the -87.45% decline that occurred on 10 Oct 2008.  On the day the Dow Jones saw its first -40% decline since November 1974, the NYSE saw 2901 of the 3306 shares trading (active shares) make a new 52Wk low, driving the 52Wk Ratio down a massive -87.45%.  

It’s a pity, I don’t have this data during the September 1929 to July 1932 Great Depression market crash. However I do have it beginning in the mid 1930s, and only the 19 Oct 1937’s 88.81% was more extreme.  The -87.45% ratio on October 10th proved to be a market extreme for the bear market, but not the actual bear market bottom for the Dow Jones or S&P500. That came on 09 March 2009, which I’ve identified with a circle below.

For another view of what happened in early March 2009, we move to the table below.  

On March 9th, the Dow Jones saw its second deepest decline since 1885 (-53.78% from its all-time high of October 2007).  Note there were only 600 new NYSE 52Wk Lows at the Dow Jones bear market bottom; far from the 2901 seen five months earlier when the Dow’s BEV first broke below -40%.  

The broad stock market had turned upward before the Dow Jones did on March 9th. The following day, NYSE 52Wk lows declined into double-digits as the great post credit-crisis recovery began with the tsunami of “liquidity” coming from Dr. Bernanke’s QE flowing into the stock market.

Retail investors should make the effort to maintain simple market statistics, such as daily NYSE market breadth data seen above. As the professionals have known for decades, following 52Wk Lows is as good a method as any to infer the bottom of a bear market.