Often referred to in the media as “New Highs and New Lows,” the High-Low Index is an observation of the number of stocks which hit 52-week highs or lows in the current day. The High-Low Index is usually expressed as a simple moving average (10-day or longer) of the Record High Percent.
A Simple Moving Average (SMA) is a technical indicator that can help traders determine whether a bull or bear trend will continue or reverse course. It typically adds up closing prices for a given time period, then divides that figure by the number of time periods used for the average. Simple moving averages are effective in their simplicity, but their efficacy is most closely tied to how they are used. By giving equal weight to each data point, SMAs can limit bias towards any specific point in a specific time period.
The Record High Percent takes the number of 52-week highs reached in a day and divides it by the sum of all the new highs and new lows in the day; that number is then expressed as a percentage. Adding the total number of new highs and new lows in the denominator means that when it is expressed as a percentage, a number over 50 indicates more new highs than lows, and the opposite if the number is below 50. These figures can then be plotted as the High-Low Index.
The High-Low Index is represented as a number between 0 and 100 and can be used to gauge bullish or bearish conditions, with a number over 50 being a bullish indicator and below 50 being a bearish one. The high-low index is normally calculated for specific market indexes like the S&P 500.
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