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Here We Go on the Advance/Decline Line Again


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#11 Lee48

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Posted 27 February 2010 - 08:20 PM

i thought the exact same thing as your title

seems like everybody has forgotten what happened at the jan top

nyad was confirming further upside and gave us no warning of a move down


I suppose we could conclude that the A/D doesn't necessarily diverge on every top, but when it does it's a distinct warning. We'll see how it plays out, but wouldn't it be interesting if that top in January turned out not to be much of a top? Either way, they change the key to the lock at every top and bottom, otherwise it would be too easy.

IT


I remember Louise Yamada saying the A/D doesn't always deverge prior to a tanking like in the 1930s meltdown and rally. She looked way back. So the A/D melting down first is not a golden rule.
December 19, 2009: As part of Financial Sense Newshour's review of 2009, Louise is interviewed by Jim Puplava and John Loeffler. Topics include current technical conditions in the equity markets, energy, gold and a glance at the beginning of next year. MP3 of the interview is available at:
netcastdaily.com/broadcast/fsn2009-1219-3a.mp3

#12 TechMan

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Posted 27 February 2010 - 09:18 PM

I remember Louise Yamada saying the A/D doesn't always deverge prior to a tanking like in the 1930s meltdown and rally. She looked way back. So the A/D melting down first is not a golden rule.
December 19, 2009: As part of Financial Sense Newshour's review of 2009, Louise is interviewed by Jim Puplava and John Loeffler. Topics include current technical conditions in the equity markets, energy, gold and a glance at the beginning of next year. MP3 of the interview is available at:
netcastdaily.com/broadcast/fsn2009-1219-3a.mp3


Thanks for the link, Lee. I'm listening to it as I write. Just a suggestion... You can put the http:// in front of the link next time so that we could just click right through.

Like this...

#13 TechMan

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Posted 27 February 2010 - 09:26 PM

We've had this debate many times over the years, long before your arrival. So I'm with Fib, I'm going to pass. Perhaps you could search the archives. Or alternatively, if you've convinced yourself that the A/D is meaningless, then simply don't use it.

Meanwhile, perhaps you could explain to me how the many closed-end bond funds and preferred stocks that are interest-rate sensitive and are included in the NYSE A/D line would have no forecasting ability for the indexes. Call me crazy, but I would think interest rates might have something to do with the direction of stock prices...but hey, what do I know?

IT


O.K. INDEXTRADER, you took a shot at me and ran off, but I'd still be happy to provide you with a brief explanatioin. It's actually an important question, notwithstanding your terrirotial attitude. One reason you can not include the bond funds, i.e. the well known TLT, is that it has the propensity to trend inversely to the stock market. Therefore, it skews the indicator.

No, you're not crazy; you just don't have the knowledge.

Edited by TechMan, 27 February 2010 - 09:31 PM.


#14 Rogerdodger

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Posted 27 February 2010 - 09:53 PM

I know somebody who has been pretty good using it, regardless of it's components.
Mr. Laundry

#15 TechMan

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Posted 27 February 2010 - 09:58 PM

I know somebody who has been pretty good using it, regardless of it's components.
Mr. Laundry


Thanks, Roge.

#16 fib_1618

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Posted 27 February 2010 - 11:20 PM

I remember Louise Yamada saying the A/D doesn't always diverge prior to a tanking like in the 1930s meltdown and rally.

Simply said, there hasn't been a time since 1926 (when A/D records were first recorded) where a bear market has started without the NYSE A/D line showing a bearish divergent structure with that of a higher price high.

Never.

In fact, it is this simple bit of information that provides the main difference between a true bear market decline from that of a correction.

Fib

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#17 IYB

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Posted 28 February 2010 - 12:20 AM

I would weigh in on this issue thusly:

Successive new highs on the cumulative A-D line (preferably running ahead of price) is a necessary but not sufficient condition for a sustainable market advance. IOW, while new highs in AD Line do not guarantee continuation of advance, the absence of those same AD line new highs pretty much guarantee that the advance will NOT continue beyond the short term. So A-D's form an important starting point for technical market analysis. Then, of course, we have hundreds of derivative indicators like McO in all of it's forms, but until we agree that there is valuable info contained in the A-D's, there is no sense in discussing them. Jmho, D

http://stockcharts.com/c-sc/sc?s=$NYAD&p=D&st=2007-02-27&en=(today)&i=p77051531053&a=192603568&r=6978.png

Atlas, here is the DP (common stock only AD Line) chart you are asking about- last three years shown below:

a11.png
“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, one by one.” Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds

#18 IYB

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Posted 28 February 2010 - 01:00 AM

But what the heck - since we touched on it, here is the Common Stock ONLY McO for last 12 months. I show it so that it cannot be argued that the McO's of ALL stocks are somehow skewed or polluted by bond funds and are thus giving phony indications. Notice that the recent thrust (the kick off move for the recent rally) took it to new highs since the July 2009 kick off, and the March 2009 kick off before that:



To me, this indicates very strong internal momentum, and a very strong probability of new SPX highs ahead, but again, that's beyond the scope of the discussion of this string. First we'd have to agree that A-D's have any significance at all, before launching into an McO discussion.... ;)

Edited by IYB, 28 February 2010 - 01:01 AM.

“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, one by one.” Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds

#19 TechMan

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Posted 28 February 2010 - 01:02 AM

Successive new highs on the cumulative A-D line (preferably running ahead of price) is a necessary but not sufficient condition for a sustainable market advance.

That's right on the head of the nail.

I do use the AD Line as part of the analytical combo, but I use primarily my Nasdaq 100 AD Line. All 100 of them are operating companies, like Apple, Microsoft, Starbucks, Costco, etc. It's looking so good so far (chart below). It had run ahead of itself from 2/18 - 2/22, and so it went through the consolidation phase last week. That gives it a chance to collect itself before the next leg up.

And, that's it for me... Good nigh guys!

ndx001.gif

#20 IYB

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Posted 28 February 2010 - 01:33 AM

The first of the two charts above was supposed to be this one. Same point, of course: And for comparison here's the ALL ISSUE Mco: NDX and SP400 which are even stronger:
“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, one by one.” Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds