Absolute Breadth Index (ABI)

The Absolute Breadth Index (ABI) is a market activity indicator developed by Norman G. Fosback.  The ABI is used to determine market volatility levels by showing how much activity, volatility, and change is taking place.

Absolute Breadth Index (ABI)

The Absolute Breadth Index (ABI) is a market activity indicator developed by Norman G. Fosback.  The ABI is used to determine market volatility levels by showing how much activity, volatility, and change is taking place on the New York Stock Exchange without considering price direction.  High Absolute Breadth Index readings indicate market activity and change, while low readings indicate inactivity or lack of change.


Absolute Breadth Index Formula

The Absolute Breadth Index is calculated by taking the absolute value of the difference between the number of advancing issues and the number of declining issues.

Formula for Absolute Breadth Index (ABI)

Absolute Breadth Index Application

In the book Stock Market Logic, Fosback indicates that high values of the Absolute Breadth Index often lead to higher prices three to twelve months later. Typically, large numbers for the ABI suggest volatility is increasing, which is likely to cause significant changes in stock prices in the coming weeks. 

This chart shows the S&P 500 and a 5-week moving average of the ABI. Strong rallies occurred every time the ABI's moving average rose above 310.

Fosback also found that a highly reliable variation of the Absolute Breadth Index could be determined by calculating the ten-week moving average of weekly ABI divided by the total issues traded.  Readings above 40% are considered to be bullish and readings below 15% are bearish.

Long term historical data for the NYSE, AMEX and NASDAQ can be found at Advances and Declines.  The web site provides advances, decliners, unchanged and associated volumes necessary for calculation of the Absolute Breadth Index back to 1965.

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