Disparity Index
A technical indicator measuring the relative position of the most recent closing price to a selected moving average and reports the value as a percentage. A value greater than zero suggests that the asset is gaining upward momentum, while a value less than zero can be interpreted as a sign that selling pressure is increasing.
Investopedia Commentary
Extreme values of this indicator can be a very useful tool for contrarian investors to foretell periods of exhaustion. Once the price is excessively pushed in a one direction there are very few investors to take the other side of the transaction when the participants wish to close their position, ultimately leading to a price reversal. Similar to the ROC indicator, important signals are generated when the indicator crosses over the zero line because it is a early signal that momentum is building.
Related Links
Rate Of Change (ROC)
Moving Averages Tutorial
Moving Averages Tutorial
Introduction To Technical Analysis
See also: Contrarian, Crossover, Exhaustion, Indicator, Momentum, Moving Average - MA, Price Rate of Change - ROC