Tuesday, May 26, 2015

The Granddaddy Of All Stock Market Divergences.........

The Granddaddy Of All Stock Market Divergences

This divergence takes into account the advance-decline line on the NYSE in relation to the S&P 500. If this 'A-D' line is keeping pace with the market and printing new highs along with the stock indexes, it represents strong participation within the broader market. And the better the participation, the healthier the market. But over the past month, the S&P is banging out new highs and the A-D line isn't there, it is lagging, acting very tired. It's a divergence, and it could turn more extreme. When that's happened in the past, it's meant one thing: a market top.

There is no guarantee that every peak in the future will be accompanied by an A-D Line divergence. However, it has a flawless historical track record of being useful in that capacity, at least at major market tops. That is saying something! THE SEPARATION IS HUGE, MEANING IT HAS A LONG WAY TO FALL BEFORE ANY KIND OF SUPPORT IS FOUND!

 

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