adv dec description

UP ISSUES RATIO

APPLICABLE TIME FRAME(S):

SHORT / INTERMEDIATE

UPDATE SCHEDULE:

Each weekday night by 5:00 PM EST

EXPLANATION:

This is the advance/decline ratio expressed as the number of issues traded on the New York Stock Exchange (we also present one for the Nasdaq) which are up on the day as a percentage of the total. For example, on any given day, if there were 1500 issues which closed higher and 600 which closed lower, then the advancing percentage would be:

1500 / (1500 + 600) = 1500 / 2100 = 71%

This calculation ignores issues which ended unchanged on the day. The ratio is observed on a 5-, 10- and 21-day moving average basis in order to smooth out extreme day-to-day fluctuations.

GUIDELINES:

This indicator can be effectively used to approximate overbought / oversold conditions. When the ratio reaches one of the extremes, caution is warranted when trading with the current trend. For example, if the trend is up and the A/D ratio reaches .60 or so on a 10-day basis, then there is a high probability of at least a short-term retracement.

Overbought/oversold indicators such as this one are most effective when giving contra-trend signals. When we are in a clear long-term downtrend and this indicator becomes overbought, then it is an effective sell signal. Conversely, if we are in a sustained uptrend and the indicator becomes oversold, then it suggests that an upside reversal may be forthcoming.

ADDITIONAL RESOURCES:

New York Stock Exchange (www.nyse.com)