today I like to explain my view to the Advanced /Decline Ratio!
How to calculate the Ratio-->
--> No of advancing Stocks/No of declining Stocks divided No of adv /No of decl . =TRIN
--> No of advancing Stocks divided No of declining Stocks= a/d-Ratio
Normally you expect a rising No of Stocks anticipating a new advance, and the No of declining Stocks is less! Often the market did not give a clear view, so it is helpful to have an „Indicator“ to analyse the internal structure of the move!
At Jan 26 the Dow Jones topped @26616.71 and declined `til Feb 09 to 23360.30 with a
Before the DOW topped a divergence was to observe, well to see at chart by the a/d-Ratio, which was at 1.27 that day and the No of adv vs decl . No of Stocks! This gives you a warning that something was coming pretty soon. We know what followed.
On Feb. 09 the a/d-Ratio was weak @ 0.21 while the No of decl . Stocks diverged to the data as of the high of Feb.07 (marked with the red arrows)! It signaled a possible end of the decline.
The following days the Index „rallied“ back to 25800.35 on Feb. 27, which was near the 0.786 FibRT, but the a/d-Ratio was very weak @0.14 and the No of adv . Stocks failed either too, to make significant highs again! Even it is more to observe that the No of declining Stocks where still rising!! At this level it was clear to observe that the market was in „unhealthy“ conditions!! What followed was a decline to fresh new Lows at April 02 with an a/d-R@0.12 and the No of adv . Stocks where „bottoming“!
The countertrend that started on April 03 made a high @24858.97 with a Ratio @ 3.48 and each following higher countertrend high was more less than the one before in terms of the Ratio(observe the chart)! And, the internal structure of the waves shows a choppy and overlapping structure! A „unhealthy“ behavior!
It is even also to observe by using the „CoT“-Data, that traders confidence in a „new rise to new highs“ in the Dow Jones (by the Contracts of the e-mini Future) where still rising at lower prices!
So the marked made a high at 25402.83 on June 11 and declined once again to 23997.21. The pullback since than is near the 0.786 RT of the decline, as it has been at the last measures too. An open taget is ~25102 for the DOW! At this point it is needed to observe the structure in terms of price, Ratio`s and looking for overbought conditions!
Once the No of declining Stocks start to rise again, it will be interesting to see, what the DOW will do...!
Hope that helps to explain my view to the market!
Have a great week...
Fell free to ask anytime...
Link to the Data of the CFTC Board ( Data)!