High-Low Differential Index
Like the advance-decline line, the high-low indicators produce signals when they diverge from the action of the indices like the Dow Jones or the S&P 500. It is considered unhealthy for the market climate if the indices make new highs without many stocks reaching new highs at the same time. Chart technicians use various methods to spot divergences from the major market indices.
The High-Low Differential Index produces good longer term signals when it diverges from the action of the Dow over a prolonged period of time. Daily or weekly data may be used and the calculation of this indicator is very simple; just subtract the daily or weekly new lows from the new highs to get the differential and apply a moving average to smooth out the swings. If you have 479 new highs and 31 new lows on your first week, the reading of your newly created weekly High-Low Differential Index would be 448 (example below).
|
Date
|
Highs
|
Lows
|
Differential
|
10-week MA
|
|
09.06.95
|
479
|
31
|
448
|
|
|
16.06.95
|
371
|
42
|
329
|
|
|
23.06.95
|
491
|
56
|
435
|
|
|
30.06.95
|
292
|
42
|
250
|
|
|
07.07.95
|
485
|
29
|
456
|
|
|
14.07.95
|
635
|
36
|
599
|
|
|
21.07.95
|
331
|
50
|
281
|
|
|
28.07.95
|
464
|
43
|
421
|
|
|
04.08.95
|
402
|
42
|
360
|
|
|
11.08.95
|
337
|
47
|
290
|
387
|
|
18.08.95
|
338
|
53
|
285
|
371
|
|
25.08.95
|
336
|
46
|
290
|
367
|
|
01.09.95
|
397
|
50
|
347
|
358
|
|
08.09.95
|
530
|
31
|
499
|
383
|
|
15.09.95
|
664
|
43
|
621
|
399
|
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Past performance does not guarantee future results!
