Zeev's Turnips Patch-No Politics (ZEEV)

[Chris McConnel]

The Chartist
An Uncommon Trend for New Highs
By Helene Meisler
Special to RealMoney.com

05/27/2003 09:30 AM EDT
URL: http://www.thestreet.com/p/rmoney/chartistrm/10089598.html

Once again, we have a confluence of indicators that are telling different stories. We can make a case for the bullish side when looking at the raw data. We can make a case for a correction when looking at the momentum of those raw data. Aside from that, Friday's action was simply more of the same.

Rather than reiterate the market's need for a correction today, I wanted to share with you some statistics I received over the weekend that speak volumes about this rally.

For more than two decades, I have monitored the number of stocks making new highs and lows on the New York Stock Exchange, as they've always been an excellent indicator of the market's general health. These statistics provide us with negative and positive divergences. At the March lows, the number of stocks making new lows provided us with a positive divergence, letting us know that stocks had become tired of going down despite the S&P 500's break of 800.

In this rally, the number of stocks making new highs has continued to expand. The only time it took a breather, we ended up with a two- or three-day correction. On Friday, I lamented that these statistics are filled with many noncommon stocks, so months ago, I had begun monitoring only the common stocks. But then I discovered that these figures I thought were only common stocks also included REITs and foreign stocks.

It turns out that the person who, through a third party, daily sends me these statistics read my column Friday. After the close, he very kindly broke out these statistics. Because I have no historical comparisons, I can't draw any conclusions about whether Friday's statistics for only common stocks resemble those we see in the newspaper for the NYSE (which expanded by a wide margin -- from 304 to 357 new highs). Nevertheless, I wanted to share them with you so you can see how much these noncommon stocks have dominated this rally.

For total stocks, 3,430 issues were traded on the NYSE. For common stocks only, total issues were 2,050. So 40% of the stocks on the NYSE are considered noncommon. Without REITs, we find 1,900 stocks, giving us roughly 150 REITs. When we take out foreign stocks, we come up with 1,500 stocks -- making almost 60% of the stocks traded on the NYSE noncommon stocks!

If we're talking about stocks making new highs, it's even more startling. The number of stocks making new highs on the NYSE Friday was 357.

If we use only what folks are calling common stocks, we're looking at 147 -- less than half.

If we take out the REITs, we get 114, and if we take out the foreign stocks as well, we're looking at just 83 stocks making new highs Friday. The bottom line is that more than 75% of the stocks making new highs Friday were not even common stocks.

So we have more than 10% of the stocks on the NYSE making new highs if we use the total figures. If we use the figures with only common stocks -- no REITs, no foreign stocks, no closed-end bond funds, nothing but real stocks -- we're looking at something closer to 2% of the stocks on the NYSE making new highs. That's quite a difference, and one that I intend to continue monitoring.