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- Advance/Decline Analysis

Advance/Decline Technical Analysis (Breadth Analysis)

Advance Decline Ratios in 2005

Sentiment, S&P 500 chart, Advance decline, volume, S&P 500, issues, stocks, technical analysis, S&P 500 index, chart, ratio, indicator, charts, quotes, 2005

The lowest A/D issues and A/D volume ratios in 200

Using our simple, conservative
("long only") trading system,
you could have obtained returns of 15 - 20%
on the S&P 500 index in 2005
(compared to a buy & hold return of only 3 %).

In 2005, there were 4 instances where the S&P 500 index reached critically low A/D issues and A/D volume ratios.

Date	Critical A/D Issues Ratio	Critical A/D Volume Ratio	Magnitude of Uptrend (Recovery Rally)	Chart and Point Reference
01/04/2005	0.10	0.13	3.5%	Chart #1 - A
04/13/2005	0.10	0.13	6.1%	Chart #1 - B
08/16/2005	0.09	0.11	2.0%	Chart #2 - A
10/05/2005	0.09	0.14	8.2%	Chart #2 - B
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In 2005, the S&P 500 moved sideways for most of the year. The index generated a mid-term run higher each time critically low A/D ratios readings appeared. We saw 2 modest and 2 strong up-trends.

Chart #1: Lowest critical A/D volume and A/D issues ratios. S&P 500 index. January - July 2005. (In the bottom pane, A/D issues ratios are listed at the top and A/D volume ratios at the bottom).
Advance/Decline chart in 2005

Chart #1 - Point A:	On January 3 and 4, 2005, the S&P 500 index declined by approximately 2%. Even after reaching critically low A/D issues and A/D volume ratios on January 4, the index continued to decline until January 24 (a loss of approximately 1.6%). It then started a recovery rally on January 25 and gained about 3.5% from the level seen on January 4 (Point A)

Chart # 1 - Point B:	After having suffered a decline of some 8%, the S&P 500 index reached critically low sentiment levels on April 13, 2005. In contrast to the situation described above for Chart #1 - Point A, the S&P 500 index made an instant recovery this time, starting an up-move on the following trading day. It also displayed a stronger recovery pattern - between April and August, the index rallied by more than 6%.

Chart #2: Lowest critical A/D volume and A/D issues ratios. S&P 500 index. August - December 2005. (In the bottom pane, A/D issues ratios are listed at the top and A/D volume ratios at the bottom).

Chart #2 - Point A:	On August 16, 2005, we saw a situation similar to the one described above for January 4. Between August 10 and 16, the S&P 500 index declined by some 2%. It generated critically low advance/decline issues and volume ratios on August 16. Following this date, the index lost a further 2.5% before reversing to the upside and gaining about 2% (compared to its August 16 closing level).

Chart #2 - Point B:	On October 4 and 5, 2005, the S&P 500 index lost more than 2.5%. This drop triggered critically low sentiment readings on October 5. Over the following 6 trading days, the index declined a further 2.5%. On October 13, the index then started a recovery rally. Similar to the situation described for April 2005, this was a very strong rally; it pushed the S&P 500 more than 8% above its October 5 closing level.

Next: Advance/Decline in 2006

V. K.

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