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NYSE 5 Day Advance/Decline Oscillator
Description | Calculation | Strategy | View Chart
Time Frame: Short
Category:
Momentum
Each day the breadth of the market can be measured by subtracting the number of declining stocks from the number of advancing stocks. A large positive number indicates a strong day, while a negative result represents a weak day. This daily breadth number is the foundation for the calculation of numerous market momentum indicators. The internal strength of the market can also be monitored by tracking the volume in rising stocks relative to the volume in those falling. Understanding the dynamics of the internal market can help identify when the market trend is likely to change its course.
Calculation & Significant Levels
NY 5-Day Advance/Decline Oscillator: A five-day moving average of the daily difference between the advancing and declining issues.
Overbought is >+400 and oversold is <-400.
Formula: Five-day average of (advancing issues - declining issues)
Gauge Elements: Magnitude, Time, Slope
Updated: Daily
The short-term internal momentum of the market often turns prior to the price changing trend. This momentum indicator should be used with the strength of the longer term trend in mind. Each of these oscillators should be viewed as a part of one whole indicator. The 5-day advance/decline value should be confirmed by the 3-day up/down volume value. The 12-day advance/decline value should be read in conjunction with the 5-day up/down volume value. The market may be over-extended when any one of these oscillators are overbought or oversold, but it is most significant when the oscillators confirm one another and change their trend in an over-extended area. Historically, when three or four of the oscillators reached an extreme and all turned within a two week time span, the market's trend changed. In a strong trending market it is common to see the 3-day advance/decline value become overbought and reverse while the price continues its trend. This pattern is more significant when the 12-day advance/decline value and the volume oscillators subsequently become extended and reverse in warning levels. The indication is even stronger if both the NYSE and NASDAQ have the same internal momentum patterns developing.
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