|
PureBytes Links
Trading Reference Links
|
Too many people assume that because there is an A/D divergence, there must
be a crash. An A/D divergence is simply an indication of a market which is
not healthy, not a guarantee of a funeral. During the divergence period from
the 98 highs, the market generally has traded sideways in a range trying to
recover from its problems. There is nothing which says that the market can
not regain its health, stage a major advance, and take the A/D line with it.
Currently, the breadth numbers (a/d, hi/lo, a/d volume) are behaving very
nicely and suggest that a sustainable rally may be underway. BUT ... an A/D
divergence coupled with rising interest rates is not a tonic for a sick
market. Either rates must stabilize or even decline a bit or the market is
unlikely to truly regain its health.
Earl
----- Original Message -----
From: Stan Book <sbook@xxxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxx>
Sent: Tuesday, November 02, 1999 4:35 PM
Subject: A/D Line divergence
> RT's
>
> If you have been looking at the SP500/AD Line divergence, you may be
> interested in this.
>
> According to John Goddess (10-29-99):
> -We do not know the length of the A/D divergence preceding the 1929 market
> peak because the statistics go back only to 1927.
> -When the A/D peaked in April 1956, 12 years before the market top in
> December 1968, it was followed by a 6 year bear market in which the
average
> stock lost almost 75%.
> -The A/D decline from its peak in April 1956 to July 1957 was followed by
a
> steep market fall, but not an extended bear market.
> -A/D divergence preceding the market tops in January 1960 and December
1961
> did not result in extended bear markets.
> -There is no reason to believe the present A/D divergence (April 1998 to
> October 1999) will break the back of the super cycle advance which began
> December 1974.
> -An advance to new highs is expected.
> -A new SP500 high, accompanied by significant A/D AND Value Line
divergence
> would lead to a sharp decline, if not an extended bear market.
>
> The A/D confirmation at the end of last week may suggest enough follow
> through to favor position trades. Just my guess.
>
>
|