The High Low Logic index shows when there is a divergence in breadth with a large number of new lows occuring with new highs as it rises above the 2% level. It now stands at 1.93%. I have highlighted previous instances where the 2% level was hit that resulted in a correction or selloff. Notice that once the 2% level is hit, the index tends to fall with the market. Bull market conditions are said to exist when the index falls back below 1%. A sell warning occurs when the index rises from below to above 1%, which it did on November 5 and December 10.
The market may continue higher into the end of the year, but I think there is no doubt we are in a dangerous market period. It is truly amazing how easily the drumbeat for a continuation of the rally into 2011 has increased in volume over the last few weeks. Trader beware.