28 replies to this topic

[IYB]

Below is a recap of the various A/D lines through Friday, showing that they failed to confirm the widely publicized big cap averages. The top chart is the Dow Jones Industrial Average for reference, then NYSE composite, followed by the charts for the advance-decline lines for the New York Stock Exchange, the "total market", the S & P small cap index, and the Nasdaq for comparison. Note, importantly, their unanimous failure to confirm recent highs in the DJIA and SPX as those big cap averages made new highs. The charts are through Friday November 13, 2009, so you need to look at the latest data on the far right side of each chart in the top section. If you look at the part of 2003 that was comparable to the current market situation, you'll see that as the DJIA and SPX made new high in late 2003, NYSE index and the A/D line for each sector confirmed. The current failure is potentially a hugely significant event, imo, and when it occurred finally in 2004, we were at the very top of the run and starting a correction that lasted more than half a year. Another important flag - and perhaps the correction is already underway. DJIA failure failure failure failure failure Notice, importantly, that the NYSE and these A/D lines NEVER failed to confirm on ANY rally peak in 2003 after the March 2003 low- and that when this failure finally showed up in March 2004, we were then in the early stages of a correction that lasted August 2004. NewHighs Confirmed Confirmed Confirmed Confirmed Confirmed

Attached Thumbnails

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Edited by IYB, 14 November 2009 - 09:15 PM.

[SuperSwing]

IYB, Thanks for the charts. Please allow me to get this right: The first group of charts (for DJIA of 2009) didn't confirm the advance of DJIA because they didn't make new highs, right? The next group (for DJIA 2004) confirmed because they made new highs, right? And I guess in that same group, you meant to copy and paste the Total Market A-D line of 12/31/04, not 11/14/09, correct? Then, in the third group (for SP600), the chart of 2004 isn't supposed to be there, is it? You meant to compare the charts for SP600 up to yesterday, right? I think I got your gist. I just wanna double check to make sure I understood everything. SS

[IYB]

IYB,
Thanks for the charts. Please allow me to get this right: The first group of charts (for DJIA of 2009) didn't confirm the advance of DJIA because they didn't make new highs, right? The next group (for DJIA 2004) confirmed because they made new highs, right? And I guess in that same group, you meant to copy and paste the Total Market A-D line of 12/31/04, not 11/14/09, correct? Then, in the third group (for SP600), the chart of 2004 isn't supposed to be there, is it? You meant to compare the charts for SP600 up to yesterday, right?

I think I got your gist. I just wanna double check to make sure I understood everything.

SS

Yep- you have it right. Third group does not belong - seems to be a glitch in the system. These "extra" charts don't show up at all in the preview - only the final post, so you have no warning..... then you have to try to edit. Maybe a moderator can remove that third group that doesn't belong. I tried hard to edit them out in the allotted 10 minute time span - but it wasn't enough time. In the second group I glitched and posted the 2009 chart where the 2004 chart was supposed to go.

But at least the main point remains and should be easy to see - and that is that for the first time since this rally began, advance/declines did NOT confirm the new highs. When that has happened at a number of key times over the years it has signaled an immanent IT top.

Thanks for reading it so carefully. Regards, D

Edited by IYB, 14 November 2009 - 10:09 PM.

[SuperSwing]

Cool, thanks a lot for sharing your insights. They are very valuable. I'll see if I can duplicate your charts later and post them here. Bye for now.

[porsche911sg]

Cool, thanks a lot for sharing your insights. They are very valuable. I'll see if I can duplicate your charts later and post them here. Bye for now.

SS, in the initial stages of a rise from a crash, there will never be a confirmation from the charts and you can get up to 50% rise till about this level where there is no confirmation.

[borland]

IYB,

I think the reason for the recent divergence between groups is due rotation and economic conditions which are significantly different now than then.



Take a look at the number of symbols traded on NYSE and Nasdaq for the two periods. Not just banks, but companies are failing at an alarming rate.

NYSE:





Nasdaq:





Checkout Decision Points discussion about A/D divergences with Price. http://www.decisionp...se/ADabout.html They are saying...

"It is common for the market to make a new high that is not confirmed by a new high on the A-D Line. This so-called non-confirmation then becomes the focus of attention and accepted evidence for many that the market is about to enter a decline. More often than not no decline materializes. So, while breadth deterioration as expressed by the A-D Line commonly does accompany major tops, its presence alone is not adequate evidence to conclude that a decline may be at hand."

Notice how Laundry uses AD Volume to calculate the cash buildup line. It will be interesting hearing his discussion about the new bull T. By not accepting this new T, he has disqualified his Second Bull Market T because the mid October peak was taken out by intraday spike on the S&P on Wednesday.

[IndexTrader]

"It is common for the market to make a new high that is not confirmed by a new high on the A-D Line. This so-called non-confirmation then becomes the focus of attention and accepted evidence for many that the market is about to enter a decline. More often than not no decline materializes. So, while breadth deterioration as expressed by the A-D Line commonly does accompany major tops, its presence alone is not adequate evidence to conclude that a decline may be at hand."

I don't know about all this, but what I would say is that an A/D non-confirmation may well lead the market for quite a period. As I recall, 1972-1973 the A/D line turned down well in advance. It may be something to check out. Nonetheless, I don't think a non-confirmation is ever something to ignore. It means something, it's worth paying attention to. But the A/D line is not an exact timing device. And then too there is the issue that if you're short S&P futures, and they are rising while the A/D line is falling, that's going to be a problem. And finally, like with most non-confirmations, it may well resolve itself given time.

IT

Edited by IndexTrader, 15 November 2009 - 12:02 AM.

[fib_1618]

in the initial stages of a rise from a crash, there will never be a confirmation from the charts and you can get up to 50% rise till about this level where there is no confirmation.

Say what? If you're talking the A/D line, this quote is absolutely not consistent to the facts.

Presented below is a longer term contextual chart to help the thread along (and hopefully present better clarity).

Have a great weekend!

Fib

[IYB]

"It is common for the market to make a new high that is not confirmed by a new high on the A-D Line. This so-called non-confirmation then becomes the focus of attention and accepted evidence for many that the market is about to enter a decline. More often than not no decline materializes. So, while breadth deterioration as expressed by the A-D Line commonly does accompany major tops, its presence alone is not adequate evidence to conclude that a decline may be at hand."

I don't know about all this, but what I would say is that an A/D non-confirmation may well lead the market for quite a period. As I recall, 1972-1973 the A/D line turned down well in advance. It may be something to check out. Nonetheless, I don't think a non-confirmation is ever something to ignore. It means something, it's worth paying attention to. But the A/D line is not an exact timing device. And then too there is the issue that if you're short S&P futures, and they are rising while the A/D line is falling, that's going to be a problem. And finally, like with most non-confirmations, it may well resolve itself given time.

IT

You are definitely correct about 72-73 IT. That was a market that was led from beginning to end by the "nifty fifty" consisting of growth stocks IBM, XRX, MCD, EK, D-I-S (had to fool the censor) and 45 more. It was a long, narrowly based advance carried by those names primarily- beginning to end.

If we had a nifty fifty here capable of sustaining this rally, I might agree. But the early leaders have been failing significantly. The "rotation" theory just has not held up to my empirical observations over the years. As leaders falter, and weaker groups take over the leadership, ultimately the music stops. And just what is the leadership now? Nothing that I can see as capable of sustaining this rally. But that's jmo.

I'm saying really pretty much the same thing as you, I think. Failure of the advance-decline line to confirm new highs should not be ignored. But it is not infallible all by itself - it's only one piece of a much bigger puzzle. Best regards, Don

Edited by IYB, 15 November 2009 - 12:53 AM.

[SuperSwing]

Porche,
Thanks for sharing. But just out of curiosity, do you have charts to confirm what you said? My chart work has been quite limited. So far, I just think the non-confirmation can exist as the price goes higher. It's something to keep an eye on but doesn't necessarily indicate exit for longs or entry for shorts.

SS

Cool, thanks a lot for sharing your insights. They are very valuable. I'll see if I can duplicate your charts later and post them here. Bye for now.

SS, in the initial stages of a rise from a crash, there will never be a confirmation from the charts and you can get up to 50% rise till about this level where there is no confirmation.