Anyone else see the AD divergence (Nasdaq)?

Discussion in 'Technical Analysis' started by Babak, Jul 29, 2005.

  1. Babak


    Anyone else see the adv/dec (cumulative) line's divergence with the Nasdaq Comp.?

    Here's what I mean...the AD line put in a top in Dec 2004 just as the index did. But since then the index has recovered (and just barely surpassed) that top while the AD line has done nothing of the sort. It is much lower.

    In fact thebottom the AD line put in, in late April (2005)was lower than the bottom it put in in August 2004. But on the index, the April 2005 bottom was significantly higher than the August 2004 bottom.

    Here are some charts so you can follow what I'm saying:

    AD Line
    (bottom one with 1 year view)

    Is this a warning signal or what?

    BTW I'm using Nasdaq stats on purpose because NYSE internal data is shot to hell with CEF/ADR/PRF/bonds, etc.
  2. Who knows.

    On the other side, the rise of AD is a bullish sign.

  3. Babak


    Which rise? That was my whole point! There isn't a concomitant rise in AD.

  4. I've noticed this ....

    One the other hand we keep getting good numbers and general economic climate is at worst stable or is continung its improvement. We also have corporate infrastructure spending kicking in - which it hasn't done in a long time. I'm seeing signs of a significant releasing of the purse strings in large coporations across a number of industrys. This is a new development .. also hiring is picking up indicating we have reached capacity in the existing workforce.

    If I had to choose a general direction for the balance of the year I would - as of today - choose up, not down.
  5. If I may, adding to your bullish stance one thing that I find interesting is how European markets have done so far this year even though most of their economies are in shambles. My charts show their indices on much stronger footing from a technical perspective than ours.

    Mind boggling....

    Still, it would be a sin to go long the US markets knowing how weak they are

    The good news is out imo.
  6. Babak


    Ideally, I would want to know what the operating company AD line is for the NYSE (something Lowry's calculates) in order to compare it to the Nasdaq numbers. However, I don't think that a divergence of this kind, if it really does exist across the board, is a sign that a fall is imminent. From the past, indices have stubbornly climbed higher and higher, although with fewer and fewer stocks leading the charge. Usually it can take months and months for an index to finally succumb to bad breadth.
  7. I'm not extremely bullish here .... I think sectors will benefit here ... some sectors will not. ....I am long some issues and short others - just like always .
  8. Babak


    I have the same outlook. There are some sectors/stocks that are gangbusters here but some that are absolutely horrid.

    Its a cliche, but it truly is the stock pickers market right now. Not at all like the boom years in the late 90s where a retarded capuchin monkey could make money.
  9. Babak


    Interesting read. I'd already observed the divergence in the midcaps/smallcaps compared to the bigcaps but I had no idea that their AD lines were also divergent. Of course, what he totally misses is that the NYSE AD line that he's using (first graph) is utterly useless as it isn't operating companies only but rather includes a mishmash of partnership LPs, bond/muni funds, closed end funds, etc.
  10. Pabst


    LOL! I was just about to post that link Babak! Wild stuff, huh?
    #10     Aug 1, 2005