Hey traders,
Let’s talk about something I get asked all the time: “How do you know if the market’s strong or weak?”
It’s not just about whether the market is going up or down.
There’s a difference between market condition and market strength — and knowing the difference can keep you on the right side of your trades.
Step One: Condition (Bullish, Bearish, or Sideways)
To figure out the condition of the market, I keep it simple.
As I’ve showed you in detail before, I pull up the major indexes — DIA, SPY, and QQQ — and plot the 20-day, 50-day, and 200-day exponential moving averages (EMAs).
- If price is above all three EMAs, the market’s bullish.
- If price is below all three EMAs, the market’s bearish.
- If it’s in between? That’s a choppy, sideways market.
That tells me the market’s overall tone.
Step Two: Strength (What’s Driving It)
But condition alone isn’t enough. I also want to know: How strong is this move?
Here’s my shortcut: compare the number of new 52-week highs versus new 52-week lows.
Of course, not every stock hitting a high or low is worth your time. So I filter the list:
- Stocks priced over $25
- Trading at least 1 million shares a day
- Listed on a major U.S. exchange
- With options available
My custom-built TrendPoint software gives it to me in a screen like this:
But you can use a tool like this free FinViz scanner to do something similar.
Once you narrow it down, you’ve got a much cleaner picture of whether strength is really behind the market.
Today’s Read
Using that filter today, I saw 49 stocks making new highs and only 9 making new lows.
That tells me strength is backing up the market’s tone. It’s not just drifting higher — there’s real participation under the surface.
The Takeaway
Market condition tells me if the market is bullish, bearish, or sideways.
Market strength tells me how much conviction is behind it.
When both line up — like they do right now — I can trade with a lot more confidence.
Next time, I’ll show you how I sift through that list of highs and lows to find the best setups.
Trade well,
Jack Carter
P.S. Is the might QQQ weakening? Here’s my take.
