WHAT IS Haurlan Index
The Haurlan Index is a technical analysis indicator, developed by rocket scientist P.N. "Pete" Haurlan, that is used to detect market breadth. The Haurlan Index measures breadth over the short term, intermediate term and long term with a set of moving averages measuring money volume of the New York Stock Exchange (NYSE).
BREAKING DOWN Haurlan Index
The Haurlan Index is named after its creator, P.N. "Pete" Haurlan, a technical manager for the Jet Propulsion Lab in Pasadena, CA, who analyzed the stock market for fun during his downtime at work. Haurlan modeled the exponential moving averages (EMAs) of his Haurlan Index after the EMAs he used to calculate rocket tracking circuitry. His index contains three components, each an EMA of the accumulation/distribution (A/D) line of the New York Stock Exchange. The A/D line is an arithmetic calculation involving start price, finish price, lowest price, and the distances between these prices, that calculates how much money is flowing into and out of a given security, to predict how the price of the security will move. The Haurlan Index calculates those numbers for the NYSE to show money flow into and out of the market as a whole to predict the market. The three components of the Haurlan Index are:
Short term, which take a 3-day EMA of the A/D line of the NYSE. This measures breakouts.
Intermediate term, which takes a 20-day EMA of the same A/D line of the NYSE. This measures resistance.
Long term, which takes a 200-day EMA od the same A/D line of the NYSE. This measures momentum.
The exponential aspect of the EMA could exaggerate blips or bumps in the A/D/ line, especially for the short term calculating, so to compensate for this Haurlan added a smoothing factor to avoid anomalies and gain a real average for the time period. The smoothing factor for the short term EMA is 50 percent, for intermediate term it's 10 percent, and for long term it's 1 percent.
Haurlan Index and Trade Levels
Pete Haurlan started an investment newsletter in the 1960s called Trade Levels. The newsletter was different from other investment newsletters of the time in that it had charts and graphs generated by computers. At the time, before the proliferation of personal computers, Haurlan used the computers at the Jet Propulsion Lab to perform investment chart calculations. This was radical at the time, and the calculating capacity of the computer allowed him to develop his Haurlan Index, with its multiple A/D line calculations and exponential moving averages. The newsletter brought his ideas and the Haurlan Index to fame, and inspired other analysts to develop technical indicators of their own using the same concepts Haurlan worked with.