What is the High-Low Index?
The high low index reveals the strength or weakness of the underlying index. It is also a breadth indicator. The index compares the number of stocks making new 52-week (1-year) highs to the number of stocks making new 52-week lows.
The High-Low Index is simply a 10-day SMA of the Record High Percent Index.
A stock index is considered strong (bullish) when the High-Low Index is above 50, which means new highs have outnumbered new lows for several days. Conversely, a stock index is weak (bearish) when the High-Low Index is below 50, which means new lows have outnumbered new highs for several days.
The strong uptrend or downtrend in an underlying index forces this indicator to move to its extremes and remain at those levels. Strong uptrend in a normal circumstance coincides with readings consistently above 70 and consistent reading below 30 paralleled with strong downtrend.
Chart: High/Low Index (Weekly)
Source: Wall Street Courier. For Educational Purposes Only.
The index is calculated by dividing the number of new highs by the number of new highs plus new lows.
Record High Percent = (New Highs / (New Highs + New Lows)) x 100
High-Low Index = 10-day SMA of the Record High Percent
The High-Low Index smoothes the Record High Percent Index with a 10-day SMA.