"Investors Intelligence uses this term to describe a more specific event which occurs over a one week period.
- A buying climax is where a stock makes a new 52 week high but then closes below the previous week’s close.
- A selling climax is where a stock makes a new 52 week low and then closes above the previous week’s close.
The reason that we use such a rigid definition for climaxes is that this enables us to classify accurately and consistently what is and what isn't a climax. This is important as we maintain historic records of the climaxes generated each week and have noted that important market turning points are often accompanied by a sudden rise in the number of buying or selling climaxes.
A great example of this was in October 2002 when the Dow Industrials made its final low. At this point, our US Market Timing Service observed a massive increase in the number of US stocks generating selling climaxes. By communicating this to subscribers, we were able to provide a good early indication that a bounce was on the cards."Cobra presents this indicator in following chart based on above definition. The same indicator is also used by EWI to help them support their wave counts.
Too many stocks in SPX reached Buying Climaxes this week, see the red bars in the chart.
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