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In Colby & Meyers "The Encyclopedia of Technical Market Indicators" there
is a section on Advance Decline Indicators. One that I found particularly
interesting was designed by Arthur Merrill of Merrill Analysis. (I have
no interest in Merrill Analysis, the indicator was reprinted in E.T.M.I.
with permission from Mr. Merrill). The indicator , (Advance Decline
Divergence Oscillator) is a method of determining the approximate value
of the DJIA based on where the AD line is. I tried it out with some small
modifications and the results were very interesting. On the day the DJIA
went to 7161.15 (10/27) the indicator (if I calculated it properly) was
giving a reading of 7980 to 7990 for where the DJIA should be. It is
currently giving a reading of 8040 - 8050 (as of 11/24). My first
impressions are that considering the subsequent retracement of the DJIA,
the ad line was indicating a greater underlying strength in the DJIA then
might have been apparent.
Ron McEwan
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