High – Low Index Trend Analysis Statistics

Markets Index are going down, when is it likely to change course? There are some indicators which give investors early signs of the prevailing trend coming to an end. A couple of such indicators like New high New Lows (NH-NL) & Index Trend direction (TD) have some very useful information.

The NH-NL index is the index of leading stocks in the direction of the market in 3 time periods. When a market is down, how many stocks are leading the downside and when it is up how many are leading on the upside. Market tops happen when upside does not match with the price move in the market. Like when the market hits a new high and the NH-NL indicator is not, it is a sign that market is getting tired.

On the down side, the NHNL indicator gives signals for a sharp reversal. The 30 day NH-NL, when it hits -1000, it is time to buy the strongest stocks in the market, the turn around will be very sharp. On the 90 day NH-NL, the indicator should hit -500 and on the 365 days or 52 week NH-NL as it is popularly called should hit -400

NH-NL of each time period can be used for different periods of buy & hold time frames. A signal on the 30 day index will be valid to hold the position for about a week or 2. 90 day signal is valid for a month long holding & the signal on 52 week will hold direction for about a quarter of an year.

NH-NL signals on the buy side are very powerful, price moves will be sharp.

One such opportunity is coming up now. 30 Day NH_NL is about to cross -1000. 90 day is already past -500 & 52 week is close to -400. What all of these are indicating is that, a turn around in the market is around the corner.

It is time to identify stocks that are stronger than the market, whole stock prices have had a significant correction after a good rally. Such stocks are the ones which will be the leaders when the market turns direction.

The Trend Direction (TD) Indicator, shows the number of stocks that are trending bullish, bearish & sideways. Ideally when there are more number of bullish trending stocks, market is euphoric. Also when there are a large number of bearish trending stocks, the reversal will be sharp.

This index is worked on the NSE 500 stocks. Weights are given for bullish, bearish and sideways directions. When the indicator hits -500 or more it is time for a reversal. Now the indicator value is at -345. In just about few days if the correction continues, we will hit the bottom.

Both NH-NL and TD are showing strong reversal signs, it is time to get prepared for identifying stocks that will have big rally.

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Ramesh Sigamani

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