The Advance-Decline Line is a market breadth indicator and should be compared to the other market indices like the Dow Jones or S&P 500. Daily or weekly NYSE data is used in the calculation. Because the Advance-Decline Line reflects the action of the general market, any divergences are watched closely by market technicians. As long as the Dow and the Advance-Decline Line are moving in the same direction the trend will continue. If the Dow makes a new high which is not confirmed by a high of the Advance-Decline Line, caution is warranted. Vice versa, if the Dow makes a new low and the Advance-Decline Line doesn't you should cover your short sales.
To calculate your own weekly Advance-Decline Line is very simple and you can begin your calculations at any time. Just pick a large enough base number like 100000. Then you calculate each week (or day) the difference between advances and declines by adding the advances and subtracting the declines. If you have 1269 advances and 1457 declines on your first week, the reading of your newly created weekly Advance-Decline Line would be 99812 (example below).
Date Advances Declines A-D Line 100000
09.06.95 1269 1457 99812
16.06.95 1714 975 100551
23.06.95 1591 1148 100994
30.06.95 1346 1348 100992
07.07.95 2032 692 102332
14.07.95 1507 1191 102648
21.07.95 894 1875 101667
28.07.95 1891 845 102713
04.08.95 1404 1291 102826
11.08.95 1187 1489 102524
18.08.95 1624 1043 103105
25.08.95 1486 1176 103415
01.09.95 1656 1011 104060
08.09.95 1903 759 105204
The Advance-Decline Line gave a useful example in 1999. During the strong bull market the advance was quite broad and the A/D Line moved in tandem with the Dow. But when the Dow made new highs in the beginning of 1999 the A/D Line was already lagging behind, indicating a weakening of the general market. Internet mania and technology craze kept the market going for a while.
The Advance-Decline Ratio is also market breadth indicator. It is calculated by dividing the number of advancing issues by the number of declining issues using daily or weekly NYSE data. It works very well as an overbought/oversold indicator and as a momentum indicator. A moving average should be used to smooth out the swings.
Date Advances Declines A/D * 100 10-Week MA
09.06.95 1269 1457 87
16.06.95 1714 975 176
23.06.95 1591 1148 139
30.06.95 1346 1348 100
07.07.95 2032 692 294
14.07.95 1507 1191 127
21.07.95 894 1875 48
28.07.95 1891 845 224
04.08.95 1404 1291 109
11.08.95 1187 1489 80 138
18.08.95 1624 1043 156 145
25.08.95 1486 1176 126 140
01.09.95 1656 1011 164 143
08.09.95 1903 759 251 158
The Upside-Downside Volume Ratio is also market breadth indicator. It is calculated by dividing the volume of advancing issues by the volume of declining issues, using daily or weekly NYSE data. It works very well as an overbought/oversold indicator and as well as a momentum indicator. A moving average should be used to smooth out the swings.
Date Adv. Volume Decl. Volume AV/DV*100 10-Week MA
09.06.95 673210 732827 92
16.06.95 943121 565840 167
23.06.95 964871 666807 145
30.06.95 674725 765076 88
07.07.95 867512 353025 246
14.07.95 945574 756197 125
21.07.95 755969 1027248 74
28.07.95 1008468 584579 173
04.08.95 733204 703285 104
11.08.95 565588 669580 84 130
18.08.95 796723 615752 129 133
25.08.95 629338 603130 104 127
01.09.95 727349 553140 131 126
08.09.95 746298 418632 178 135
The Upside-Downside Volume Line is a market breadth indicator and should be compared to the other market indices like the Dow Jones or S&P 500. Daily or weekly NYSE data is used in the calculation. Because the Upside-Downside Volume Line reflects the action of the general market, any divergences are watched closely by market technicians. As long as the Dow and the Upside-Downside Volume Line are moving in the same direction the trend will continue. If the Dow makes a new high which is not confirmed by a high of the Upside-Downside Volume Line, caution is warranted. It is more affirmative than the Advance-Decline Line and it gave a perfect sell signal in January 2000, when the Dow made a new high and the Upside-Downside Volume Line lagged behind (charts below). Vice versa, if the Dow makes a new low and the Upside-Downside Volume Line doesn't, you should cover your short sales. To calculate your own weekly Upside-Downside Volume Line is very simple and you can begin your calculations at any time. Just pick a large enough base number like 1000000. Then you calculate each week (or day) the difference between the upside volume and downside volume by adding the volume of advancing issues and subtracting the volume of declining issues. If you have an upside volume of 673210 and a downside volume of 732827 on your first week, the reading of your newly created weekly Upside-Downside Volume Line would be 940383 (example below).
Date Upside Volume Downside Volume U-D Volume Line 1000000
09.06.95 673210 732827 940383
16.06.95 943121 565840 1317664
23.06.95 964871 666807 1615728
30.06.95 674725 765076 1525377
07.07.95 867512 353025 2039864
14.07.95 945574 756197 2229241
21.07.95 755969 1027248 1957962
28.07.95 1008468 584579 2381851
04.08.95 733204 703285 2411770
11.08.95 565588 669580 2307778
18.08.95 796723 615752 2488749
25.08.95 629338 603130 2514957
01.09.95 727349 553140 2689166
08.09.95 746298 418632 3016832
Here is a beautiful example of the Upside-Downside Volume Line. Volume moves
the markets and this indicator gave a perfect sell signal in December 1999, when the Dow made a new high and the Upside-Downside Volume Line didn't. It would have kept you also on the right side of the market right to the top.
Another method used by market technicians is to calculate the net difference between the upside- and downside volume. Daily or weekly data can be used. The net difference between upside- and downside volume is calculated weekly and the result is added. To smooth out the swings, a 10-week moving average should be applied. Below there is an example for weekly calculations:
Date Adv. Volume Decl. Volume Net Difference Cumulative 0
09.06.95 673210 732827 -59617 -59617
16.06.95 943121 565840 377281 317664
23.06.95 964871 666807 298064 615728
30.06.95 674725 765076 -90351 525377
07.07.95 867512 353025 514487 1039864
14.07.95 945574 756197 189377 1229241
21.07.95 755969 1027248 -271279 957962
28.07.95 1008468 584579 423889 1381851
04.08.95 733204 703285 29919 1411770
11.08.95 565588 669580 -103992 1307778
18.08.95 796723 615752 180971 1488749
25.08.95 629338 603130 26208 1514957
01.09.95 727349 553140 174209 1689166
08.09.95 746298 418632 327666 2016832
Another method used by market technicians is to calculate the net difference between advances and declines. Daily or weekly data can be used. The net difference between advances and declines is calculated weekly and the result is added. To smooth out the swings, a 10-week moving average is applied. Below there is an example for weekly calculations:
Date Advances Declines Net Differ. Cumulative 10-Week MA
09.06.95 1269 1457 -188 -188
16.06.95 1714 975 739 551
23.06.95 1591 1148 443 1182
30.06.95 1346 1348 -2 441
07.07.95 2032 692 1340 1338
14.07.95 1507 1191 316 1656
21.07.95 894 1875 -981 -665
28.07.95 1891 845 1046 65
04.08.95 1404 1291 113 1159
11.08.95 1187 1489 -302 -189 535,0
18.08.95 1624 1043 581 279 581,7
25.08.95 1486 1176 310 891 615,7
01.09.95 1656 1011 645 955 593,0
08.09.95 1903 759 1144 1789 727,8
This indicator is calculated by dividing the weekly number of advances and declines by the number of total issues traded. A 10-week moving average is applied to smooth out the swings.