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A/D
Indicators |
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Indicators based on the "advances" and "declines" concept -
The lowest A/D issues and A/D volume ratios in 2005
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.
| Table
1.
Lowest critical A/D volume and A/D issues ratios in 2005. S&P 500
index.
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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).
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| Chart #1 - Point A:
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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). |
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| Chart # 1 - Point B:
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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).
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| Chart #2 - Point A:
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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). |
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| Chart #2 - Point B:
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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. |
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