This article is from the Glossary of Technical Analysis Terms.
This indicator is calculated daily from the plurality of NYSE advances over declines. There are three components of the Haurlan index: Short Term, Long Term and Intermediate Term.
1) Short Term. A 3-day exponential moving average is taken of the net NYSE advances over declines, measuring the short term condition of the market. When this index moves above +100, a market short term buy signal is generated. The signal is in effect until the market drops below -150 at which time a sell signal is generated. The sell signal remains in effect until the index moves above +100 again.
2) Intermediate Term. Same as above but with a 20-day exponential moving average. This index is considered the most important of the three. Market buys and sells are determined in this index by the crossing of trend lines or support/resistance levels depending on the particular market in question. For example, when the market is basing out in preparation for an uptrend, a resistance level may be set up. Once its value is determined, buy and sell signals could be generated for that market.
3) Long Term. Same as above except for a 200-day exponential moving average. Useful for determining trends but not for signals.
Also can be inverted. A reversal pattern that is one of the more common and reliable patterns. It is comprised of a rally which ends a fairly extensive advance. It is followed by a reaction on less volume. This is the left shoulder. The head is comprised of a rally up on high volume exceeding the price of the previous rally. And the head is comprised of a reaction down to the previous bottom on light volume. The right shoulder is comprised of a rally up which fails to exceed the height of the head. It is then followed by a reaction down. this last reaction down should break a horizontal line drawn along the bottoms of the previous lows from the left shoulder and head. This is the point in which the major decline begins. The major difference between a head and shoulder top and bottom is that the bottom should have a large burst of activity on the breakout.
This is a commodity trading tool, useful for the early spotting of changes in price trend direction. The Payoff Index is best used to distinguish trends that are destined to continue from those that will most likely be short-lived. The Payoff Index is a commodity trading tool that is useful in the early identification of changes in the direction of price trends. The Payoff Index frequently helps distinguish between a rally in a trend that is destined to continue and a significant trend change that will provide a worthwhile trading opportunity. The Payoff Index tends to give coincident signals within a day or two before a significant change in price trend. This advance action is accomplished through use of trading volume and contract open interest to modify the price action. Analysts have observed that volume trends often change before a price-trend change. There are also generally accepted relationships between the price trend and the trend of open interest.