Norman Fosback’s High-Low Logic Indicator
By
Rennie on Thursday, October 20th, 2011 at 7:48 pm
A recent article by Mark Hulbert on Norman Fosback’s High-Low Logic indicator prompted me to recreate the indicator as outlined in the column (as best I could). I utilized daily data rather than weekly, so the results are not identical, but the bottom line is the same. I combined new 52-week highs among the NYSE, NASDAQ and AMEX and divided the result by the total number of issues. I did the same for new 52-week lows, then took the lesser of these percentages to create the base indicator. I ran a 50-day moving average of this base number for a rough approximation of the 10-week average described in the article. The final numbers are different, but the implications are the same. Unusually low readings, found when new 52-week highs or lows dominate for an extended period, have bullish long-term implications. Utilizing daily data, I found when the 50-day average dropped below 0.5%, the market was a buy until the average rose above 1%. It’s occurred eleven times since 1980, and in each case the market was either flat or higher when the signal was closed out. Average gain was 17.6%, average loss was 0.9%. This signal was triggered earlier this month on October 6th at SPX 1164.97, suggesting the market will probably be around that level or higher when the 50-day average rises above 1%. Not necessarily signaling a buy at current levels, but an indication that the 1100-1150 area could prove to be long-term support. As of Wednesday, the 50-day average stands little changed since October 6th at 0.51% (see chart)…
50-day moving average of the lesser of new 52-week highs & lows (NYSE + NASDAQ + AMEX) expressed as percentage of total issues.
Buy when Avg <0.5%, Exit when Avg >1.0%
10/06/11 Buy SPX 1164.97… Exit ???
11/17/08 Buy SPX 850.75… Exit 08/13/10 1079.25… +26.9%
01/06/05 Buy SPX 1187.89… Exit 03/31/05 1180.59… -0.6%
06/05/03 Buy SPX 990.14… Exit 05/25/04 1113.08… +12.4%
10/06/97 Buy SPX 972.69… Exit 12/12/97 953.39… -2.0%
03/04/92 Buy SPX 409.33… Exit 04/24/92 409.02… -0.1%
10/05/90 Buy SPX 311.50… Exit 12/06/91 379.10… +21.7%
12/04/87 Buy SPX 223.87… Exit 10/20/88 282.88… +26.4%
03/12/87 Buy SPX 291.22… Exit 05/11/87 291.57… +0.1%
03/15/85 Buy SPX 176.53… Exit 05/17/85 187.42… +6.2%
11/01/82 Buy SPX 135.46… Exit 10/18/83 167.81… +23.9%
05/08/80 Buy SPX 106.13… EXit 05/06/81 130.78… +23.2%
Norman Fosback’s High-Low Logic Indicator
By Rennie on Thursday, October 20th, 2011 at 7:48 pmA recent article by Mark Hulbert on Norman Fosback’s High-Low Logic indicator prompted me to recreate the indicator as outlined in the column (as best I could). I utilized daily data rather than weekly, so the results are not identical, but the bottom line is the same. I combined new 52-week highs among the NYSE, NASDAQ and AMEX and divided the result by the total number of issues. I did the same for new 52-week lows, then took the lesser of these percentages to create the base indicator. I ran a 50-day moving average of this base number for a rough approximation of the 10-week average described in the article. The final numbers are different, but the implications are the same. Unusually low readings, found when new 52-week highs or lows dominate for an extended period, have bullish long-term implications. Utilizing daily data, I found when the 50-day average dropped below 0.5%, the market was a buy until the average rose above 1%. It’s occurred eleven times since 1980, and in each case the market was either flat or higher when the signal was closed out. Average gain was 17.6%, average loss was 0.9%. This signal was triggered earlier this month on October 6th at SPX 1164.97, suggesting the market will probably be around that level or higher when the 50-day average rises above 1%. Not necessarily signaling a buy at current levels, but an indication that the 1100-1150 area could prove to be long-term support. As of Wednesday, the 50-day average stands little changed since October 6th at 0.51% (see chart)…
50-day moving average of the lesser of new 52-week highs & lows (NYSE + NASDAQ + AMEX) expressed as percentage of total issues.
Buy when Avg <0.5%, Exit when Avg >1.0%
10/06/11 Buy SPX 1164.97… Exit ???
11/17/08 Buy SPX 850.75… Exit 08/13/10 1079.25… +26.9%
01/06/05 Buy SPX 1187.89… Exit 03/31/05 1180.59… -0.6%
06/05/03 Buy SPX 990.14… Exit 05/25/04 1113.08… +12.4%
10/06/97 Buy SPX 972.69… Exit 12/12/97 953.39… -2.0%
03/04/92 Buy SPX 409.33… Exit 04/24/92 409.02… -0.1%
10/05/90 Buy SPX 311.50… Exit 12/06/91 379.10… +21.7%
12/04/87 Buy SPX 223.87… Exit 10/20/88 282.88… +26.4%
03/12/87 Buy SPX 291.22… Exit 05/11/87 291.57… +0.1%
03/15/85 Buy SPX 176.53… Exit 05/17/85 187.42… +6.2%
11/01/82 Buy SPX 135.46… Exit 10/18/83 167.81… +23.9%
05/08/80 Buy SPX 106.13… EXit 05/06/81 130.78… +23.2%