The Power of New Highs

This week I want to revisit something I wrote last summer about the power of new highs:

All-time highs in the market are a good thing -- they mean companies are moving in the right direction. Since 1950, there have been 1,100 all-time daily highs recorded, about one in every 15 trading days. Even better, all-time highs tend to cluster, so seeing one all-time high is usually a good sign you’ll see more. How good? 76.5% of new all-time weekly highs have been followed by another new weekly high sometime in the next month. The probabilities are even better when you look at individual stocks. In non-geek, that means if I see a new high this week, there’s a 76% chance an even higher high is coming sometime in the next month. I’m not saying a new high must occur, just that 3/4 times it has.

Strangely, I’ve been noticing more articles again warning of corrections because we’re at “lofty” new highs. Given the data, it’s hardly something to get anxious about if you have a good strategy. Of course no one can predict the next correction, and it certainly won’t be showing up in articles all over the net. Earning a good return is not about calling the tops and bottoms. It’s about having the discipline not to.  

Ben Kizemchuk is a Portfolio Manager & Investment Advisor with Altus Securities Inc. in Toronto. He offers financial planning and investment management for high net worth Canadian investors. Ben focuses on high quality investments, the Growth and Income Portfolios, low risk investing, and reducing tax.