V.12:1 (23-25): The Haurlan Index by Paul E. Carroll

The Haurlan index, which was originated by the Trade Levels, Inc., advisory service, has received comparatively little attention unfortunate, as it has proved to be effective in signaling tops and bottoms. By Paul E. Carroll

The number of advancing and declining stocks each day provides the raw data for a variety of breadth indicators and trading systems, among which are the advance-decline line, the McClellan oscillator, the Nicoski index (advancing stocks divided by declining stocks) and the Bolton-Tremblay indicator, to mention only a few. And then there is the Haurlan index.

I have found the Haurlan index to be quite effective in signaling market tops and bottoms. The index is essentially an exponential moving average of advancing stocks minus declining stocks. I use New York Stock Exchange (NYSE) daily breadth data in my calculations. Three variations of the Haurlan index are short, intermediate and long term. First of all, to seed this, start with today's breadth (that is, the number of today's advances minus the number of today's declines) and for the next day, take yesterday's breadth as yesterday's index. Calculate the short-term version by taking yesterday's index and adding to it a product of a smoothing constant and the difference of today's breadth minus yesterday's index.