High-Low Differential Index

The High-Low Differential Index is a market breadth indicator that produces signals when they diverge from the action of the indices like the Dow Jones or the S&P 500.

High-Low Differential Index

The High-Low Differential Index is a market breadth indicator that produces signals when they diverge from the action of the indices like the Dow Jones or the S&P 500.

 

High-Low Differential Index Calculation

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.



Application of High-Low Differential Index

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

 



Related Terms