Oct. 18, 2011, 10:34 a.m. EDT · CORRECTED
Indicator with great record turns bullish
Commentary: Message from High Low Logic Index is bullish
By Mark Hulbert, MarketWatch
CHAPEL HILL, N.C. (MarketWatch) — Would you be interested in a market indicator that has correctly called every major market top and bottom in recent decades—with few false signals?
Of course you would.
And the good news doesn’t stop there: This exceptional indicator is currently in very bullish territory.
The indicator I’m referring to is the High Low Logic Index, which was devised in the 1970s by Norman Fosback, then the President of the Institute for Econometric Research, and currently editor of Fosbacks Fund Forecaster. The index represents the lesser of two numbers: New 52-week highs and new 52-week lows with both expressed as a percentage of total issues traded.
Higher readings of the High Low Logic Index are bearish, according to Fosback, as they suggest that “the market is undergoing a period of extreme divergence… Such divergence is not usually conducive to future rising stock prices, [since] a healthy market requires some semblance of internal uniformity.”
Interestingly, Fosback found from his research, “it doesn’t matter what direction that uniformity takes. Many new highs and very few lows is obviously bullish, but so is a great many new lows accompanied by few or no new highs.”