SPY in Leading Uptrend, but New Lows Expand – Two Signals to Watch
- Arthur Hill, CMT
Welcome to the Chart Fix!
SPY is within 3% of a 52-week high, but small-caps took a hit and new lows are expanding. This expansion, however, has yet to derail a bullish signal from May 2025. Today’s report will review this bullish signal and show the key levels to watch. We will also set bear market thresholds for SPY and new lows
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New Lows Expand, but have yet to Signal a Bear Market
The chart below shows SPY in the top window with the 5 and 200 day SMAs and S&P 500 New Highs/Lows. I made SPY thin and opaque to focus on the 5/200 cross. Smoothing the close with a 5-day SMA reduces the number of whipsaws without sacrificing signal integrity.
First, SPY remains in a long-term uptrend because the 5-day SMA is well above the 200-day SMA. In addition, SPY hit a new high just four weeks ago and is currently trading within 3% of this high. Small-caps may be taking a hit, but large-caps are doing just fine. Keep in mind that the Technology sector accounts for 37% of the S&P 500 and XLK is holding its recent breakout, which was featured on TrendInvestorPro.
The bottom window shows new highs and new lows as a positive/negative histogram. 52-week highs and lows are lagging indicators, but they provide insights on market leadership. Stocks hitting new highs are in leading uptrends, while stocks hitting new lows are in leading downtrends. Obviously, we want to see more leading uptrends than downtrends.
I have a blue line at 50 and a pink line at -50 for bull and bear market thresholds. With 500 stocks in the S&P 500, these thresholds mark the 10% level. Leadership is strong when new highs exceed 50, which first occurred on July 23rd, 2025. New lows have not been below -50 since early April 2025.
As far as bull and bear market signals are concerned, I would stay in bull market mode as long as the 5/200 cross for SPY is bullish and new lows have yet to exceed -50. In a strategic sense, a bearish 5/200 cross and expansion of new lows (>50) would signal a bear market.
S&P 500 High-Low Line is Still above Key EMA
The next chart adds the S&P 500 High-Low Line (middle line). This is a cumulative measure of net new highs (new highs less new lows). This line rises when new highs outnumber new lows and fall when new lows outpace new highs. The market has a bullish bias as long as new highs outnumber new lows. Breadth weakens when new lows increase and the High-Low Line turns down.
I added a 20-day EMA to define the upturns and downturns in the High-Low Line. There was a whipsaw in January 2025, a bearish cross in early April and a bullish signal on May 13th, 2025. This High-Low Line has been rising since May 2025, which marks a 16 month run and 30+ percent gain in SPY.
Currently, the High-Low Line is at 7779.60 and the 20-day EMA is at 7770.77, which means the High-Low Line is still rising. A cross below the 20-day EMA would show new lows outpacing new highs and this would be negative for stocks. In a tactical sense, such a cross could foreshadow a test of the 200-day SMA in SPY.
ETFs related to Tech, Semis and AI are leading since August with breakouts holding. We are monitoring these breakouts, as well as the steep rise in oil and interest rates.
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