High-Low Index
Categories: Index Funds
On any given day, some stocks will reach new 52-week highs. This means that the share price for a particular company reaches its highest point in at least a year. Meanwhile, any given day will see some stocks reach new lows...companies with share prices dropping to their lowest point in at least a year.
The ratio of these two (new highs vs. new lows) provides a gauge of general market trends. A stock market that's seen sustained increases will have more stocks reaching new highs than ones reaching new lows. And vice versa...a slumping market will have a higher proportion of new lows.
The high-low index tracks day-to-day changes in the ratio of new highs vs. new lows for the S&P 500 (an index that tracks the 500 biggest and most influential public companies). Investors watch the high-low index as a sign of strength or weakness in the overall market.