Recently we've been seeing the market make new highs, but with persistently large numbers of stocks making fresh 52 week new lows. Going back to March, 2003 (N = 793), I found 260 occasions in which the S&P 500 cash Index ($SPX) made a five-day closing high. Five days later, the S&P was up by .14% (146 up, 114 down), weaker than the five-day average gain of .30% (454 up, 339 down) for the sample overall.
Interestingly, when we conduct a median split of the data based on the number of stocks making new 52 week lows, a pattern emerges. When new lows are elevated and the S&P makes a five-day high (N = 260), the next five days average a gain of only .04% (63 up, 67 down). When new lows are restrained and the S&P makes a five-day high (N = 260), the next five days average a gain of .25% (83 up, 47 down).
Clearly, when many stocks are weak and the S&P is making highs, returns are subnormal. I'll be factoring that into decision making in the current market, in which new lows have been especially elevated.