Haurlan Index

What Is the Haurlan Index?

The Haurlan Index is a technical analysis indicator, developed by rocket scientist P.N. "Pete" Haurlan, that is based on market breadth. The Haurlan Index measures breadth over a shorter period of time, intermediate term, and long term with a set of moving averages derived from the number of advancing and declining stocks on the New York Stock Exchange (NYSE).

Understanding the Haurlan Index

The Haurlan Index contains three parts that are exponential moving averages (EMAs) of the accumulation/distribution line (A/D line) of the New York Stock Exchange.

Calculating the A/D line starts with subtracting the number of stocks that declined on the NYSE from the number that advanced on a given day to get net advances. On the next day, add the new figure for net advances to the previous total. The A/D line is formed by continuing to add new net advances in this fashion.

The three parts of the Haurlan Index are:

1. Short-term, which takes a 3-day EMA of the A/D line of the NYSE. This EMA is for ordinary short-term trades.
2. Intermediate-term, which takes a 20-day EMA of the same A/D line of the NYSE. This EMA measures support or resistance.
3. Long-term, which takes a 200-day EMA of the same A/D line of the NYSE. This EMA measures the general trend.

Exponential moving averages sound complicated, however computers can easily calculate them for you. Conceptually, EMAs are basically the same as ordinary moving averages (MAs), which are far easier to understand.

The exponential aspect of the EMA could exaggerate blips or knocks in the A/D line, especially for the short-term calculation. To compensate for that, Haurlan added a smoothing factor to avoid anomalies and gain a real average for the time span. The smoothing factor is half for the short-term EMA, 10% for the intermediate-term EMA, and just 1% for the long-term EMA.

What Does the Haurlan Index Tell You?

The parts of the Haurlan Index pass on information about different aspects of the market. The long-term EMA tells investors the overall trend of the market. As a general rule, most traders usually really like to trade with the trend to avoid false signals.

The intermediate-term EMA is for support or resistance. At the point when an indicator hits support or resistance, it could be an indication that a significant change is underway in the market. That is an ideal opportunity to make major trades and, depending on the circumstances, perhaps bet against the long-term trend.

The short-term EMA is for ordinary short-term trading all through the market. A short-term Haurlan Index greater than +100 is considered a short-term buy signal. These types of trades should be as per the long-term EMA. These short-term trades frequently have less profit potential, however they also typically have less risk.

Most technical indicators require confirmation from different signals. Be that as it may, the presence of different parts inside the Haurlan Index allows for internal confirmation.

History of the Haurlan Index

The Haurlan Index is named after its creator, P.N. "Pete" Haurlan. He was a technical manager for the Jet Propulsion Lab in Pasadena, CA. During his downtime, Haurlan analyzed the stock market. He modeled the exponential moving averages of his Haurlan Index after the EMAs he used to calculate rocket tracking hardware.

Pete Haurlan started an investment bulletin during the 1960s called Trade Levels. The bulletin was different from other investment pamphlets of the time in that it had charts and graphs generated by computers. Before the proliferation of personal computers, Haurlan used the computers at the Jet Propulsion Lab to perform investment chart calculations. That was revolutionary at the time, and the calculating capacity of the computer allowed him to develop his Haurlan Index, with its numerous A/D line calculations and exponential moving averages.

The pamphlet brought his ideas and the Haurlan Index to fame. It also inspired different analysts to develop technical indicators of their own involving the same concepts as Haurlan.

Features

• The Haurlan Index is a technical analysis indicator that is based on market breadth.
• The long-term EMA tells traders the general trend, the intermediate-term EMA signals potential large changes, and the short-term EMA is for short-term trades.
• Each of these three components is used to assess and affirm predictions made with the other two indicators.
• The Haurlan Index was developed by P.N. "Pete" Haurlan, a rocket scientist at the Jet Propulsion Lab.
• The Haurlan Index contains three parts that are exponential moving averages (EMAs) of the accumulation/distribution line (A/D line) of the New York Stock Exchange.

FAQ

Why Is a Moving Average Used in Technical Analysis?

Technical analysis utilizes moving averages because to assess price developments without capturing the random noise of daily price fluctuations. This allows analysts to compare short-and long-term trends and make derivations about market sentiment.

What Are the Primary Methods of Technical Analysis?

Technical analysis forecasts price changes based on observed market trends, like the number of buyers or dealers for a particular asset. This is based on the assumption that all relevant information is already factored into a security's price, and can be inferred from changes in the supply and demand for that asset.

What Is the Moving Average Convergence Divergence?

The Moving Average Convergence Divergence (MACD) is a momentum indicator that compares short-and medium-term trends to forecast future price developments. By comparing a short-term moving average with a longer-term moving average, analysts can make predictions about future market behaviors.

What Is the Relative Strength Index?

The relative strength index (RSI) is a momentum indicator that is used to determine when an asset is in oversold or overbought conditions. The RSI is calculated by comparing an asset's average recent price gains with its current price gains, through a formula that communicates relative strength as a percentage. A RSI above 70% is considered to be overbought, and a RSI below 30% is considered oversold.