Ask Colin

Does New Highs - New Lows line work for a futures contract eg SPI200?

I am not sure what you mean by "work". The New Highs- New Lows line is a general indicator of breadth in the market. It is looking at all the stocks listed on the ASX, not the ASX 200 Index specifically. You might want to calculate it only for the S&P/ASX 200 index. However, I would suggest the need to carefully back-test it over a substantial number of years and several cycles before relying on it.

It is not a precise timing indicator and, as such, I would be very reluctant to rely on it for futures trading, which because of the leverage is high risk and short term in nature. However, the New Highs - New Lows line is a valuable warning of changes in breadth and sentiment in the market as a whole. It might be one piece of information you use in your general market environment analysis. Taking it beyond that is probably pushing it too far.

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