Tono,
There is a difference between the A/D Line and the A/D Index. Either way rising values of the advance/decline can be used to confirm the likelihood that an upward trend will continue. If the market is up but there are more declining issues than advancing ones, it's usually a sign that the market is losing its breadth and may be getting ready to change direction.
I'm not the one to be asking about divergence.
As far as the zig zag goes, it is not a reliable indicator because of the variation in its last leg.
Looking at the pic that you sent March of 2009 was ready for a breakout. The A/D couldn't go much lower and the index prices were consolidating. It sounds like you have several partners. What were their thoughts?
You should also look for other indicators that you could use on the index.
Preston
--- In equismetastock@ yahoogroups. com, Tono <tonmdn@xxx> wrote:
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> Dear Preston,
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> Thanks for your valuable insight.
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> How about using a percentage as a threshold in identify the divergence ie : 5% ,10 % and so on according to the historical volatility of the index. the same principle as used in zig zag or elliot wave system?
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> What do you think about that idea?
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> After all, we use this indicator for a first screening, we will look into the chart and other indicator for further confirmation.
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> Thanks again
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> Tono
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> --- On Mon, 1/18/10, pumrysh <no_reply@xxxxxxxxxx s.com> wrote:
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> From: pumrysh <no_reply@xxxxxxxxxx s.com>
> Subject: [EquisMetaStock Group] Re: Index & AD Line Divergence Indicator - Help
> To: equismetastock@ yahoogroups. com
> Date: Monday, January 18, 2010, 11:25 AM
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> Tono,
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> I really have reservations about what you are asking.
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> Here's why. What you have drawn looks nice but it is after the events have taken place. Notice that the A/D line is not a straight line...it goes up and down. The same holds true for your index. The best that you should expect is to use a smoothing method like a moving average. When you do this you will introduce lag meaning that the movement will be after the fact and not current. So basically you will gain nothing.
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> I'm not saying that what you want can't be done, just that its going to require a lot of work.
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> Preston
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> --- In equismetastock@ yahoogroups. com, Tono <tonmdn@> wrote:
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> > Dear all,  Â
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> > Â Â Â
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> > Can anyone help me to create an indicator that show each stage of market as defined below :
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> > Stage 1 : On a bottom, the Index line will stop downward move and move higher but the A/D Line will continue down. This indicates the start of a bull market.
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> > Stage 2 : A/D Line and the Index going up , then market in stage 2
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> > Stage 3Â Â Â : on stage 3 there should be a widening gap /divergence between the index and A/D lines, as the A/D Line loses momentum but Index line continue higher.
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> > Stage 4 : A/D Line and the Index going down , then market in stage 4
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> > and how to incorporate the above indicator in exploration of individual stock? Â Â Â
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> > in example : I want to find stocks that have moving average golden cross but only when market are in stage 1 or 2 . Â
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> > I have attached an image on this email and uploaded an image to EquisMetaStock Group under "Photo" section within album "Index & AD Line Divergence" for a picture  Â
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> > worth a thousand words.  Â
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> > Thanks in advance
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> > Tono
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