Advance-Decline Line

 

The Advance-Decline Line is a market breadth indicator and should be compared to the other market indices like the Dow Jones or S&P 500. Daily or weekly NYSE data is used in the calculation. Because the Advance-Decline Line reflects the action of the general market, any divergences are watched closely by market technicians. As long as the Dow and the Advance-Decline Line are moving in the same direction the trend will continue. If the Dow makes a new high which is not confirmed by a high of the Advance-Decline Line, caution is warranted. Vice versa, if the Dow makes a new low and the Advance-Decline Line doesn't you should cover your short sales.

To calculate your own weekly Advance-Decline Line is very simple and you can begin your calculations at any time. Just pick a large enough base number like 100000. Then you calculate each week (or day) the difference between advances and declines by adding the advances and subtracting the declines. If you have 1269 advances and 1457 declines on your first week, the reading of your newly created weekly Advance-Decline Line would be 99812 (example below).

 

 

Date

Advances

Declines

A-D Line

     

100000

09.06.95

1269

1457

99812

16.06.95

1714

975

100551

23.06.95

1591

1148

100994

30.06.95

1346

1348

100992

07.07.95

2032

692

102332

14.07.95

1507

1191

102648

21.07.95

894

1875

101667

28.07.95

1891

845

102713

04.08.95

1404

1291

102826

11.08.95

1187

1489

102524

18.08.95

1624

1043

103105

25.08.95

1486

1176

103415

01.09.95

1656

1011

104060

08.09.95

1903

759

105204

 

  The Advance-Decline Line gave a useful example in 1999. During the strong bull market the advance was quite broad and the A/D Line moved in tandem with the Dow. But when the Dow made new highs in the beginning of 1999 the A/D Line was already lagging behind, indicating a weakening of the general market. Internet mania and technology craze kept the market going for a while.
 
 

Advance-Decline Line

 

Dow Jones for comparison    S&P 500 for comparison   Main Menu    Updated charts are available on WallStreetCourier.com

 

 

 
Past performance does not guarantee future results!
 
 




The Financial Ad Trader
The Financial Ad Trader