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The Absolute Breadth Index (AKA "ABI") - a market momentum indicator developed by Norman Fosback. The ABI shows how much activity, volatility, and change is taking place while paying no attention to the direction prices are actually heading. This makes it a kind of "activity index." High readings mean markets are active, and change is happening. Low readings mean lack of change - nothing going on here bud. From a day trading perspective, it is difficult to see how it could be useful except as part of a package of indicators trying to predict future direction, and as we know, predicting fmarket futures is impossible. The time scales are also wrong for a daytrader - historically, high values typically lead to higher prices between three & twelve months later. The Absolute Breadth Index can be calculated by taking the absolute value of the difference between Advancing Issues and Declining Issues. Note - Absolute value (i.e., ABS) means "ignore the sign." Eg, the absolute value of -100 is 100 and the absolute value of +100 is also 100. |
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