The New Highs/Lows Ratio (“NH/NL Ratio”) displays the daily ratio between the number of stocks reaching new 52-week highs and the number of stocks reaching new 52-week lows.
The NH/NL Ratio is another useful method to visualize the relationship of stocks that are making new highs and new lows. High readings indicate that a large number of stocks are making new highs (compared to the number of stocks making new lows). Readings less than one indicate that the number of stocks making new highs are less than the number of stocks making lows.
Refer to the New Highs-New Lows indicator for more information on interpreting the NH/NL Ratio.
The following chart shows the S&P 500 and the NH/NL Ratio.
The Ratio increased dramatically when the S&P 500 began making new highs in 1990. However, as the S&P has continued to move on to new highs, the Ratio has failed to reach new highs. This implies that the S&P 500 is weaker than it appears.