I know that you guys are smarter than I am, so I appreciate it when you contribute. I really appreciate the great comments.
I wanted to expand a bit more on the new highs/lows, and more particularly how they can point to a waning trend.
Sleepless noted that during a significant crash, there would be some bastardization regarding new highs/lows. And, we'd expect to see the line advance.
Please note the highlighted area. What we are looking for are divergences. Divergences are nothing really more than a "heads up" to open your peepers and be vigilant. First, note that the yellow rectangle shows first a flattening of the moving average of the net difference of new highs and new lows while the index continues higher. Second, the index and the moving average moves directionally aligned. Third, we should ask? What to expect next? I'm guessing that we'd expect to see a FLATTENING of the moving averages, no?
I also wanted to talk a little bit more about trending v. trading markets. Last summer (2008), I pulled out my 3" binder of all of the StockCharts stuff that I printed out in 2005. I actually did it in a day, and I remember clearly doing it on my deck. Somehow, I had missed the distinction of when you use oscillators v. a trend. I realized that I was having a 'moment'--a V-8 slap on the head moment. (It is also accompanied by a stain of embarrassment on one's cheeks).
Simply put, if a stock is strongly trending, your moving average and the MACD are your best friends. The MACD is going to tell you whether or not the short term trend (on either a simple or exponentially measured means) is moving further away from the long term average or closer.
If a stock is NOT trending, but rather chopping about in a range, then an oscillator is your best friend. I've seen several people in various places present charts and talk about the stochastics being pegged and a down move is soon to follow. When the down move does not come, then there's mumbling/grumbling about the PPT or what have you. In a strongly trending market, oscillators can stay pegged in either overbought OR oversold territory for some time.
There's a helpful tool called the ADX, or the Average Directional Index. You can read about it here. I used to have something taped to my monitor to REMIND me to look at the ADX if I could not discern trend. If the ADX was rising, I'd look to the moving averages. If the ADX was stalled, I'd look at an oscillator.
Your handy source for technical indicators is here. Understand how indicators are crafted and what is a leading v. a lagging technical indicator (just as you ought to know those things for economic indicators!)