Forex

Stock and futures traders used to live like two separate tribes. They traded
different markets and used different analytic tools. The wall between them
began to crumble after stock index futures were created in 1982. Both tribes
rushed to trade them. An astute trader owes it to himself to master the tools
of both tribes.
Shrewd stock traders use Stochastic, moving averages, and other tools of
futures analysts. Futures and options traders can time their stock index trades
better by using stock market indicators. They include the New High-New
Low Index (probably the best leading indicator of the stock market), the
Traders' Index (TRIN), and several others.

How to Construct NH-NL

The New High-New Low Index (NH-NL) tracks the numbers of market
leaders. It measures the number of stocks that have reached new highs or
lows for the year on any given day. The stocks on the list of new highs are
the leaders in strength, and the stocks on the list of new lows are the leaders
in weakness. NH-NL confirms trends when it rallies or falls in gear with
prices. It identifies tops and bottoms in the stock market when it diverges
from prices.
The New High-New Low Index measures daily differences between new
highs and new lows. The New High-New Low Index is easy to calculate by
hand, using information from the Market Diary section of most major newspapers.

NH-NL = New Highs - New Lows

New highs and new lows are reported by most data services in the United
States. Make sure that your data vendor calculates new highs and lows over
a 52-week period. Some use the ancient "calendar method" and calculate
new highs and lows going back only to January.
Plot the New High-New Low Index as a histogram, with a horizontal reference
line at zero level. On the days when there are more new highs than
new lows, NH-NL is positive and plotted above the centerline. On the days
when there are more new lows than new highs, NH-NL is negative and plotted
below the centerline. If the numbers of new highs and new lows are
equal, NH-NL is zero.