What Is The 20 Day Hi-Lo Telling Us?

Above a chart of the SPY (in blue) vs the # of stocks making 20 Day High less those making 20 Day low (in pink)

Note since the sell-off on 16 Aug where SPY recorded a new low yet 20 day high - low made a higher low (bullish divergence), we have had 4 occasions (highlighted in yellow dotted lines) where the 20 day high - low pulls back near zero and then the market continues its climb up. The last pullback occurred on 25 Sep.

I last mentioned here that we'll expect to see some pullback or sideways movement this week and indeed we saw this in the early week. We now have some room to move ahead and this chart is pointing to upside bias. As we approach month end and also the end of Q3, watch out for the bulls to come window dressing. But take note that any adverse economic data on the heavily loaded Fri could easily derail us from this path.

Tags: simplyoptionstrader, market internals