When an index like the S&P 500 or Dow Jones moves in one direction, not all the assets which it covers move up too. The price of an index may be rising even though the majority of its stocks are falling since a small number of those assets are posting very large gains, bringing the whole index higher.
Taking the performance of the current S&P 500 index, the price of the asset seems to be hitting new all-time highs even if the majority of its underlying stocks are falling. This is largely due to the performance of companies like TSLA and APPL, whose disparate returns are literally carrying the index.
Such an indicator allows investors to assess how strong or weak the underlying assets of an index are, as well as gain insight into where the index might be heading next. Looking at the balance between rising and falling stocks (stocks hitting new highs and lows) can provide insight about an index’s potential future trajectory.