Ask Colin

Can the divergence rule on the advance decline line apply if the market just goes up without making peaks and troughs?

It is very rare for a market to just go up without making some peaks and troughs. It could only happen for days or weeks - I have never seen a market go up without peaks and troughs for a year, for instance.

However, yes the principle applies. If the market is heading up and the advance decline line is falling, I would be cautious - especially if a bull market was well advanced. But, if we were near a bottom in a bear market, I would not worry, because the advance decline line will tend to lag the index at bottoms.

It is all very academic though. The best signals jump off the page at us. If we have to argue whether there is a signal, there usually isn't one there.

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