Here is a titbit on the A/D line, particulary long term one.
Perma Bears over do a bad A/D line, ( and I bought into that
early on ), and had to do some thinking about it.
To start with A long term A/D line can not keep up with the indexes ever maybe short term but not long term
Mostly because a lot of good small companies keep getting bought out and they no longer show up in the Advance line.
If we could keep track of the mergers and add that number to
the long term advance line it wouldn't look as bad as it does.
When a company merges or gets bought you like have
2 companies going up by proxy but the market is only
seeing one.
The same can be said for the decliners but not as many
of them are bought or merged. Heavens look at how many companies MSFT has bought over the years, and no one can argue that her long term trend is not up, GE is another one that buys up companies left and right..in fact half the major big caps that have good long term uptrends have made many many aqusitions, add all them to the A side of the long term A/D line and it
would print much higher and not give near as bad a picture
as the perma Bears are convinced it does..and would have us to believe. ( they have not put their brain in gear, the A/D line
is not worth a crap for any thing but short term TA, it's
chained and doomed to drag behind the advance line over time
in any kind of bull market.
AS the economy does better then more companies
come on line and more get bought , leaving the dogs making up
the decline line..and 2/3rds of the good ones not getting
counted any more after they have joined forces with a bigger company.
Who can keep up with all the mergers & it would take keeping
taps on them to create an honest A/D line.
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Short term OK , longer term forget it and don't let a perma
bear tell you how bad it is historicly..as the way it is
and was recorded has a big short coming..
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Other than the A/D line lets keep in mind at market bottoms
New Lows set records and max out, at market tops the new
Highs set record numbers and max out, it's a relative thingy,
and not all together reliable here again a lot of mergers
can deplete the companies that would be going on to make
new highs..when they are bought at a premium it slows up
the buyers stock at least for a while , and you just get
that one new high one time,,,then it's gone.
I get more worried about a market when the new highs start
setting records than I do when new lows set records.
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So much for the A/D line.
Jim
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