The Advance/Decline Line
The Advance/Decline Line measures market breadth. It is an indicator that is used to confirm the major trend of the market.
If the market trend is up (as measured by major market indexes like the S&P 500 Index) we would expect that most individual stocks are trending higher in price. The Advance/Decline Line should then be zig-zagging upward.
If the market trend is down, we would expect that most stocks are trending lower in price. The Advance/Decline Line should then be zig-zagging lower.
The direction of the Advance/Decline Line generally parallels the direction of the major market indexes. When there is a divergence between this indicator and the market averages (where one is going up while the other is going down) it often indicates that caution is warranted. An alert investor will watch for other signs that may point to a change in the market's trend.
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If the market trend is up (as measured by major market indexes like the S&P 500 Index) we would expect that most individual stocks are trending higher in price. The Advance/Decline Line should then be zig-zagging upward.
If the market trend is down, we would expect that most stocks are trending lower in price. The Advance/Decline Line should then be zig-zagging lower.
The direction of the Advance/Decline Line generally parallels the direction of the major market indexes. When there is a divergence between this indicator and the market averages (where one is going up while the other is going down) it often indicates that caution is warranted. An alert investor will watch for other signs that may point to a change in the market's trend.
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posted by Bob Moser at
7:14 PM
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