Calculation of Absolute Breadth Index (ABI)
The Absolute Breadth Index counts the difference between the advancing and declining issues and gives up the actual direction in which prices are moving. Norman G. Fosback discovered this index. It clearly shows the unsteadiness and constant changes on the NYSE - New York Stock Exchange.
If this index demonstrates high values, then it means market activity and possible changes. If this index demonstrates low value indicates, then it means that no changes are taking place.
Fosback also found out that high values, as a rule, cause higher prices 3-12 months afterwards. The most widely used way of using the Absolute Breadth Index is to divide the weekly ABI by the whole issues traded on the market. If after 10 weeks, the moving average is calculated and readings are less than 15%, then they are called "bearish." Readings higher than 40% are called "bullish."
Calculation of Absolute Breadth Index (ABI):
ABI = |Advancing Issues - Declining issues|