Market Breadth
figure 22.9 The High‐Low Index Indicating Potential Tops and Bottoms in the NYSE
Index.
Courtesy of Stockcharts.comFigure 22.9 displays numerous overbought and oversold indications between
the NYSE index and its High‐Low Index. The NYSE High‐Low Index is a 10‐day
simple moving average of the ratio of new highs over the total number of new
highs and new lows. We see the overbought levels in the NYSE High‐Low In-
dex line up fairly well with both smaller market downside corrections and larger
reversals. The market also tends to rebound strongly every time the NYSE High‐
Low Index tests the 30 to 35 percent oversold region.volume‐Based Breadth indicators
Figure 22.10 is a chart of a Nasdaq AD Volume Line, or Net Advancing Vol-
ume Line. The Nasdaq AD Volume Line tracks the daily running total of the
net up volumes. Some practitioners also use the ratio‐adjusted version. From
the chart, we immediately observe a significantly clear and obvious standard
bearish divergence between the Net Advancing Volume Line and the Nasdaq
Composite Index, indicating a potential top in the market. Notice the market’s
subsequent rapid decline.the trin (arms index) indicator
Figure 22.11 shows a chart of the TRIN indicators. TRIN is the ratio of advances to
declines over the ratio of up volume to down volume, that is, (A/D)/(UV/DV). It is a
contrary indicator. Readings near or above 3.0 are bullish, while those near or be-
low 0.5 are bearish. In the chart, we notice that every time the TRIN penetrates both
the upper Bollinger band and the 2‐sigma level, it coincides with a market bottom.