This momentum indicator is used primarily as a component of the Accumulative Swing Index.
Welles Wilder developed the Swing Index to provide a line "which cuts through the maze of high, low and close prices and indicates the real strength and direction of the market." (For a detailed description refer to Wilder's book New Concepts in Technical Trading Systems.)
The Swing Index is used primarily as a basis for Wilder's Accumulative Swing Index (ASI) indicator.
Mr. Wilder summarizes the significance of the Swing Index as follows:
The Swing Index alone doesn't provide much in the way of signals. It should be used in conjunction with the Accumulative Swing Index.
See the Accumulative Swing Index.