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Pastimes : Ask Mohan about the Market

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To: Kid Rock who wrote (11156)12/12/1997 9:13:00 AM
From: John Hunt  Read Replies (1) of 18056
 
Thomas re Advance-Decline Line,

<< Can you give me a brief definitiion of Advance-Decline Line >>

The A/D line is calculated by cumulating the # stocks advancing - # of stocks declining, usually on a daily basis.

When a market is trending, this chart will be very similar in shape and in coincident peaks and valleys to the index chart.

When a market is breaking trend, there is often a divergence between the index and the A/D chart. For example, the Dow or S&P may be making new highs while the A/D chart is declining, which indicates fewer and fewer stocks are moving the market.

You can do much the same thing by comparing the Dow or S&P to the broader NYSE index or the Russell 2000 index.

Hope this helps.

John

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