What Are Advances and Declines?

Advances and declines refers generally to the number of stocks (or other assets in a particular market) that closed at a higher and those that closed at a lower price than the previous day, respectively. Technical analysts look at advances and declines to analyze stock market behavior, discern 澳洲幸运5官方开奖结果体彩网:volatility, and predict whether a price trend is likely to continue or reverse.

Typically, a market will be more bu💞llish if more stocks advance than decline and vice versa over some timeframe.𒈔

Understanding Advances and Declines

Advances and declines form the basis of many different technical indicators, including the advance-decline ratio, the advance-decline index, and the absolute breadth index. For example, a low advance-decline ratio can indicate an oversold market, while a high advance-decline ratio can signal an 澳洲幸运5官方开奖结果体彩网:overbought market.

Either of these conditions could mean that a market trend has become unsuꦫstainable and is about to reverse.

Often times, traders combine the advances and declines indicators with other forms of technical analysis. A great example would be looking at momentum indicators, like the 澳洲幸运5官方开奖结果体彩网:relative strength index (RSI) or 澳洲幸运5官方开奖结果体彩网:moving average convergence-🌄divergence (MACD) for a divergence, and then looking at advances and declines as a conf🌳irmation that a trend change is beginning to occur.

Advances and Declines Indicators

There are many different 澳洲幸运5官方开奖结果体彩网:technical indicators that are calculated using ad⛄vances and declines:

• Advance-decline ratio: The 澳洲幸运5官方开奖结果体彩网:advance-decline ratio, or ADR, compares the number of stocks that closed higher against the number of that closed lower during a particular period (and can be used across many timeframes).
• Advance-decline index: The 澳洲幸运5官方开奖结果体彩网:advance-decline Index, or ADI, is a market breadth indicator that represents the total difference between advancing and declining securities within an index. Sometimes, the current index level is represented as a horizontal line on a price chart known as the 澳洲幸运5官方开奖结果体彩网:advance-decline line.
• Absolute breadth index: The 澳洲幸运5官方开奖结果体彩网:absolute breadth Index, or ABI, is a technical indicator that's based on the differences between advances and declines on an index. Unlike the prior two readings, the ABI ignores the direction that prices are going and instead focuses purely on the differences to measure volatility.

These indicators are generally interpreted in the same way: Rising values tend to indicate a bullish market and falling values tend to indicate a bearish market. For example, the above chart shows a rising advance-decline line reading between December and mid-January, which suggested that advances outpaced declines during the uptrend.

The only exception is the ABI, which measures only volatility and not direction. Often times, the ABI is interpreted by taking a 澳洲幸运5官方开奖结果体彩网:moving average of the reading and looking for significant trends, which can show rising and fa🌞lling volatility trends.

Example

Below is an example of the advance-decline line for the S&P 500 SPDR ETF (SPY) as it appeared in May 2018. It appears as the blue line graph plotted below the 澳洲幸运5官方开奖结果体彩网:candlestick chart.

As you can see, the number of advances relative to declines is increasing through May, when it reaches a maximum, perhaps indicatiﷺng a bull rally to come soon. Indeed, as we now know, the market did ris﷽e through the second half of 2018 and into 2019.