Ask Colin

Notwithstanding its downward bias, what is the big downward slope on the Advance-Decline line telling us?

The pronounced downward bias in the line is of concern and seems to have got worse in the last decade. We do not know why. It could be something to do with the switch to a computerised market in the 1990s. This is something that I want to do some research on, but finding the time is always a problem.

I think the downward slope of the line told us something very important as the 1990s bull market wore on. It was then not unexpected in the bear market.

Since the bottom in March 2003, the Advance-Decline line rose with the market, but then began to diverge earlier this year. This should have been a signal, but with the market making new highs and the Advance-Decline line still falling, it poses the question of whether this is an important signal, or just the downward bias overwhelming a moderate rise. Time will tell, perhaps.

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