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Strategies & Market Trends : Stock Attack -- A Complete Analysis

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To: Lee Lichterman III who wrote (33569)	10/21/2000 10:42:50 AM
From: OldAIMGuy	Read Replies (2) of 42787

Hi Lee, Great Rant! RE: "High Low ratios, our new indicator" I've used Fosback's Hi/Low Logic formula for many years with good success on calling events about 3 months out. I have solid data from 1986 and pretty good data from 1982 through 1985. Fosback takes the smaller of either the new highs or the new lows and divides it by the total number of issues being traded on that exchange. He used the NYSE. I decided to use the same formula but apply it to the NASDAQ where I've had much of my money invested over the years. A week ago, for instance, there were 77 new highs and 1031 new lows on the NASDAQ with just over 5000 issues traded for the week. So, this looks to be about 1.5% when we divide the smaller number by the total issues. In reviewing my database, it was my opinion that the Neutral range is from about 2.75% to 4.25%, with high Bearish above and Bullish below. Last week was the first Bullish reading in some time. It's been neutral to bearish for a while. Also of interest is that it's been very rare since '93 that we've had only double digits of new highs simultaneous with four digit new lows. I call this index the Divergence component. If there are both lots of new highs and new lows simultaneously then there's significant divergent thinking. Conversely, if there's lots of one but very few of the other statistic, then everyone is thinking the same thing. The previous week's emphasis on New Lows with very few New Highs indicates all the ducks are lined up. This has historically been a bullish sign on its own. What's also very interesting is that had the values of the New Highs and Lows been reversed, we still would have had the same bullish reading. This was Fosback's cogent deduction. The raw data can be viewed and saved from: aim-users.com and look for Divergence Data Since the data is as reactive as the markets themselves, I use a 10 week exponential moving average to smooth the values and get rid of "noise." To see what it looks like since about 1997, click on aim-users.com this can be compared to aim-users.com for close to the same time frame. I'll be updating all of these graphs next week. I usually just do it once per month. Hope this helps those interested in this kind of data. Best regards, Tom

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