The NH-NL index do it again



By kind permission of Elder.com, the website of the recognized trader, Alexander Elder, I reproduce for you, literally, its recent article "Books and Trades #256: A Spike Lesson... Education... A new book special" of April 24th, about the accurate signal that gives the New High- New Low Index (NH-NL) indicator in the powerful market recovery since late December 2018, post which I publish hereNot popular in trading platforms,  in www.indexindicators.com you can find this indicator for the SP500 or other indexes. Just select the stock index, and in Breadth indicator the NH-NL option.

Now the SP500 SPX is all-time highs again and, in Elder' words, the question now "is whether the upmove will continue more or less uninterrupted or whether there’ll be a retest of the initial low like we saw in 2016. Some gravity is seen returning to the markets".


Dear Trader,
The letter I had sent to you right after Christmas, was headlined “A major buy signal on stand-by.”  The Spike signal triggered two days later and produced a record-setting rally.
Spike signals are very rare – they occur only a few times in a decade.  They are extremely powerful, but most traders fail to take full advantage of them.  I hope that the following recap will help you be better prepared when this signal occurs again.
A Spike is the strongest signal in technical analysis (which is why SpikeTrade group is named after it). It occurs when weekly New High – New Low Index (NH-NL) drops below minus 4,000 and then rises above that level. Do not confuse it with a Spike Bounce signal which comes from a daily chart in the monthly look-back window.  That lesser signal occurs many times a year (3 times so far in 2019) and delivers more modest rallies.
Let’s review three charts, showing the latest Spike signals, and then draw a lesson from them…


In 2009: an explosive 35% rally in 14 weeks, followed by a great deal more after a reaction to less than one ATR below value. In 2011: not shown because that Spike signal occurred intraweek. Still, it was followed by a great lasting rally. 

In 2016: an impressive 10% rally that lasted 20 weeks, followed by a lot more after two reactions to one ATR below value.
In 2019: a 16% rally over a 15 week period – and it may last even longer.
Most traders fail to take full advantage of Spike-driven rallies because they treat them as normal rallies and sell too soon.  It pays to hold a position taken after a Spike signal for a much longer time. I hope this review and analysis will help you in your trading. Best wishes for successful trading from all of us at elder.com.
Dr. Alexander Elder & staff