Advances Declines

When it comes to index trading and or market analysis it becomes essential to have Advance Decline Data. You may analyze price movement, volume activity, money flow and volatility, however, index's price is based on the price movement of its constituents. A stock's price depends on the supply and demand (pressure of buying and selling traders) in this stock, respectfully, the price of an index depends on the supply and demands in all stocks listed in this index.

It is wrong to think that the S&P 500 index price is pushed by ES futures (futures on the S&P 500). It is wrong to assume that S&P 500 index follows the SPY stock (S&P 500 tracking ETF). The S&P 500 pushed up or down by the 500 stocks - by the supply and demand in all these stocks. That is why, when it come to the S&P 500 index analysis, it is highly important to know what these 500 stocks are doing, where they are moving, how active they are, how far away they are from their 52-week highs and 52-week lows and etc. All this important information could be obtained from via Advance Decline data.

You may find fundamental analysts who are skeptical about technical analysis. However, when it comes to index technical analysis they all  you that you must know what stocks listed in your indexes are doing and for that you must have access to the advance decline data, charts and advance decline based technical indicators. Advance Decline analysis (also called as Breadth Analysis) is widely recognized by all market professionals.

There are number of traders and market analysts who still prefer to analyze raw advance decline data. Yet, it is common way to use Advance/Decline indicators (Breadth Indicators). You may find number of Breadth indicators, however the main and the most used are Advance Decline Ratio (shows relation between advancing and declining stocks), advance decline volume ratio (shows whether we have higher trading activity in the group of declining or advancing stocks) and TRIN which ties together number of advancing and declining stocks and volume associated with them.