Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : LastShadow's Position Trading -- Ignore unavailable to you. Want to Upgrade?

To: Dave Shares who wrote (7384)	1/28/1999 8:47:00 AM
From: LastShadow	Respond to of 43080

Informational post The Advance Decline Numbers Whenever you read Briefing.com's Stock Ticker page for overall market conditions, you should always look at the advance decline numbers, in addition to looking at the major market indexes. While the market indexes give an immediate sense of the direction of the overall market, the advance decline numbers give you the best feel for the "breadth" of the market. Breadth is important for gauging the strength of index movements. Definitions Stocks which are currently trading higher than the previous day's closing price are said to be "advancing." Conversely, stocks which are trading lower than the previous day's close are "declining." The total number of all stocks advancing when compared with the total number of stocks declining is the advance decline ratio. The advance decline ratio is rarely quoted as an actual ratio, but is frequently referred to as a fraction, as in "Advances outnumbered declines by a 2 to 1 ratio today." The numbers are reported separately for each exchange. NYSE numbers and NASDAQ numbers together constitute the overall market. Use As An Indicator The advance decline ratio is useful for determining the overall breadth of market movement. In concert with other measurements, it helps give a broader picture of market moves. It is often used as a secondary indicator, after the Dow Jones Industrial Average, or NASDAQ Composite, for an overall "feel" of any particular day's action. On days when the advancers about equal the decliners, it "offsets" any movement in the indexes. Days where the advance decline ratio is about 1 to 1 should be seen as neutral days, regardless of the movement in the indexes. There are many days when the Dow Jones Industrial Average increases, but the advance decline ratio for the NYSE exchange is less than one. Because there were more declining stocks than advancing stocks, the overall market actually declined, even though the DJIA moved upward. When this happens, it should really be viewed as a down day, although the conventional wisdom is to say the market "was up" on that day. Most Important When 2 to 1 or Higher On days when the ratio is 2 to 1, with either decliners or advancers ahead, the advance decline numbers are far more significant for judging market movements. When the advance decline ratio is higher than 2 to 1, the overall tone of the market is viewed more positively. In the absence of other factors, a strong tone generally continues. Therefore, when advancers outnumber decliners by 2 to 1, or more, it is a very positive sign, even if the indexes show little movement. Conversely, when the closing decliners outnumber advancers 2 to 1, or higher, it is often viewed as a negative indication for the market's overall tone. However, the advance decline ratio does not take into account the size of an advance or decline and therefore is only partially useful as a indicator. It's primary use is as a secondary measurement on the current day's market movements. The advance decline numbers are particularly useful when judging the market's movements during the day. Large changes in the market indexes, without corresponding breadth as shown by the advance decline numbers, often indicate a weakness in the trend, which then flattens out later in the day. Correspondingly, a large imbalance in the advance decline number often presages more movements in the index.