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Advance Decline: Back to Back Extreme Days at Trader’s Narrative

Sometimes it helps to understand the markets by peeling back the price layer and peeking at the internals like advance decline numbers. I mentioned before that extremes of advance decline usually point out the start of a trend.

Last week we saw back to back extreme days in this metric. On Thursday, May 10th 2007, we had the AD line fall to -1731 (close to maximum lows ~ -1750). And the next day, on Friday, May 11th 2007, it rose to +1200 (not that close to maximum highs ~ +1400). This is quite unusual.

This back to back up and down wasn’t at all as extreme as the late February to early March bottom but it still was noteworthy. The last time we had this magnitude of up and down advance decline numbers was in late November of last year.

On November 27th 2006, the Nasdaq advance decline shows an extreme -1920 reading. Then just two days later, on November 29th 2006, it flipped to the other side with a +1101 reading. As you can see on the graph below, this was followed by a continuation of the uptrend:

advance decline extremes back to back nasdaq.png

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4 Responses to “Advance Decline: Back to Back Extreme Days”  

  1. 1 P-

    Hey you have a cool site! I always like somebody that has a different set of metrics that works for the individual.
    Makes for very interesting reading!! I like variety in mu life and i LOVE life! Just stumbled upon this site from a list on another. I’ve got a set of tools to gauge the market combination of charts and metrics. Even with a good system the market can always prove you wrong because it is always controlled eventually by the ONES that has the most vested in it and the most to lose if it ever fails.

    What i’m talking about is the idea of America and its free market system. A LOT OF PEOPLE HAVE A VESTED INTEREST IN SEEING IT SUCCEED and there’s a small percentage that will make sure it does AT ANY COSTS. The talk is always about money, money, money, old money and even older money, legacy costs, bottomline, what’s my return on risk and monetizing that risk. We’re geniuses of risk monetization and that famous diversification to the entire world. Wall Street the BRILLIANT!

    What i find most fascinating are the ‘mystery buyers’ that that just popped up to shore up the market and there’s no metric to read that!

    Keep up the good work!


  2. 2 Babak

    Thanks P :-)

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