Advance/Decline Technical Analysis (Breadth Analysis)
Advance Decline Weekly Report
Friday, February 18, 2005
|Chart 1.||Advancing and Declining (AD) Issues and AD Volume. |
S&P 500 Index. February 14 to February 18, 2005.
Intraday Data (One Bar = 5 minutes)
|Table 1.||Advancing and Declining (AD) Issues and AD Volume. |
S&P 500 Index. February 14 to February 18, 2005
|Online, the data in this table can best be viewed using a 6-month AD chart. Select the following settings: "A/D" and either "Adv / Decl Volume or "Adv / Decl Issues". Apply a 1-day Adv/Decl MA (moving average).|
Table 1 above shows that:
- February 14, 2005: For February 14, we calculated an A/D issues ratio of 0.90. Stocks were split almost evenly between advancing and declining issues, with 233 issues in the S&P 500 index advancing and 259 declining. With an A/D volume ratio of 1.29, volume activity was higher in the group of advancing stocks. The day's data tells us that market breadth was neutral;
- February 15, 2005: By the end of trading on February 15, 309 stocks in the S&P 500 index belonged to the group of advancing issues, but only 286 were counted among the group of declining issues. Chart 1 above shows that during the first half of the day, market breadth was healthy, with the Advance/Decline issues ratio peaking at a value of 5.77 and the A/D volume ratio hitting a high of 2.90 at 10:55 (data is smoothed by 15-minute moving averages). However, by the end of the day, sentiment was on the decline, moving lower toward neutral territory. Based on the number of issues, advances beat declines by a ratio of only 9 to 5 (an Adv/Decl issues ratio of 1.76). The Advance/Decline volume ratio (of 2.10) remained higher than the A/D issues ratio. At the close, sentiment was still somewhat positive, although getting very close to neutral;
- February 16, 2005: On February 16, 207 stocks belonged to the group of advancing issues and 286 were counted among the group of declining issues. Based on the number of issues, declines beat advances by a ratio of 10 to 7 (an Adv/Decl issues ratio of 0.73). Similar readings were found for the A/D volume ratio - here, declines beat advances by a ratio of 10 to 6 (an Advance/Decline volume ratio of 0.64). This tells us that market breadth was neutral;
- February 17, 2005: On February 17, declines beat advances by a ratio almost 5 to 1 (an A/D issues ratio of 0.23). With a reading of 0.17, the Adv/Decl volume ratio was smaller. While 404 stocks belonged to the group of declining issues, only 91 were part of the advancing group. These sentiment readings were reached during the first 90 minutes of trading, when the S&P 500 had already declined by almost 0.60%. The same market breadth readings persisted until the end of the day, by which time the S&P 500 index had now lost almost 0.80% from its close the previous day.Market breadth was strongly negative on this day;
- February 18, 2005: On February 18, 205 stocks advanced while 282 declined. Based on the number of issues, declines beat advances by a ratio of 10 to 7 (an A/D issues ratio of 0.73). In terms of volume readings, declines beat advances by a ratio of 10 to 8 (an A/D volume ratio of 0.84). This tells us that market breadth was more neutral than negative.
Over the past week, the S&P 500 index lost 0.31%. This was in large part due to the significant downside push that occurred on Thursday, February 17. A review of last week's AD report shows that a strongly bullish market sentiment had prevailed on Friday, February 11 (with an Advance/Decline volume ratio of 3.98 and an equally high A/D issues ratio of 4.61). This week, on Thursday, we saw a counter-reaction to this bullish sentiment - the market moved down strongly, and the previously bullish mood gave way to a strongly bearish sentiment. Thus far in 2005, equally negative sentiment readings have been reached only twice before: On February 9 (where we calculated an Adv/Decl issues ratio of 0.18 and an Advance/Decline volume ratio of 0.19), as well as on January 19 (where the A/D issues ratio was 0.28 and the Advance/Decline volume ratio dropped to 0.14). We exclude January 5, where market breadth was far more negative (with an A/D issues ratio of 0.10 and an Adv/Decl volume ratio of 0.13).
In retrospect, the week as a whole showed a rather neutral sentiment, with an overall Advance/Decline issues ratio of 0.74 and an A/D volume ratio of 0.79. The overall neutral readings can be attributed to the fact that that market breadth remained more or less neutral for four of five trading days. It was only on a single day - Thursday, February 17 - that we saw sentiment readings deteriorate significantly. The bearish mood on this day pushed the average market breadth readings for the week below 0.8. The influence of the one negative day was not strong enough, however, to drag overall weekly sentiment readings into negative territory.