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Dear Howard
The first divergence of the A/D line has not been put to rest. The current DOW
rally did not begin to eliminate the divergence and we have not reached the major
bottom of the bear and begun a bull. In fact the divergences have been continuous
and extreeme. The usual behavior of the NYSE A/D line is to mimic the the DOW or
S&P or any other broad index. Divirgences or significant divergences do not
begin to occur in a bull market until until what I would call the technical top
of the bull cycle. From that point on the divirgences tend to become continuous
untill the the test after the major bottom.
By October 7, 1998, I was of the opinion that a major bottom had been completed
and a new bull market had begun. The evidence at that time was persuasive. There
were powerful base formations in the DOW stocks, we had breadth climaxes of
historic proportions and the pesimism was thick. The beginning of a new bull
market is met by skepticism. The news is usually horrible. The public tends to
sell into the the new emerging bull. There are few divirgences in the advance
decline line. This new bull I predicted was not met with skepticism; it was met
with speculative revelry, internet fireworks. This was the pattern found at the
1991 electroncis & bowling top, at the 1969 over the counter go go blowoff first
rally in the bear market after the 1968 top, and was also found in the euphoric
1987 top.
The current failure of the A/D line to confirm the whole rally begun in October
and the last three minor rallys within the up move, tells us that heavy selling
(distribution) is taking place under cover of strength in the DOW. In a bull
market the unexpected broad moves of the market are on the upside. The significant
decline for the major averages has not yet begun and is probably iminent.
A continuous history of the A/D is available at http://www.decisionpoint.com/
HBernst963@xxxxxxx wrote:
> Since we had a divergence in 1998 and then had the 20% selloff, the divergence
> did it's job. Since we've gone to new highs, you restart the AD line, thus use
> the recent high of 1-8-99 as the one that you would look for divergences from,
> not the 1998 high. Like I said, the 1987 AD line high was not taken out until
> the end of 1993 so if you kept on saying I'm still bearish because the AD line
> has not taken out the 1987 high, you would have missed 6 years on the upside.
>
> Howard
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