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Posts: 1,054
Reply with quote  #1 

It has been well documented on TW the "raw" NYSE composite cumulative AD line has achieved an all-time high during the current bull cycle.  However, due to the ever increasing number of issues traded on the NYSE over the past 80 years, comparing the magnitude of the NYSE AD line today, some 3700 issues, with the number of issues traded in 1926, a little over 500 stocks, a ratio adjusted line of advances and declines must be used.


For a perspective of where we currently are with respect to the ratio adjusted (RA) cumulative AD line all-time high, achieved in the spring of 1959, below is the NYSE AD line from 1926.  The RA cumulative AD line is currently around +79,500 some 11,200 RA points short of the 1959 all time highs.  Translating to the number of actual, or "raw" net advances required to break the 1959 RA-AD line high, it will take approximately 38,000 net advances to set a new high from where the RA-AD line currently sits.


A lot of net advances to be sure, and a testimonial to the incredible liquidity present in the US markets during the 1940s and 1950s.


As a precursor to another study to be posted later this week, circled in green is the behavior of the NYSE cumulative AD line during the two secular (not cyclical) bear markets over the past 80 years.  There are many extremely competent analysts who feel a secular bear market (from a price perspective) began in 2000.  Since the previous two secular bear markets lasted from 14 to 16 years, we are at best, only half way through the current secular bear, if indeed we are in a long term bear market.


More details on liquidity and secular bear markets later, but the liquidity as measured by the AD line seen over the past three years certainly "bears" little resemblance to that of the two secular bear markets over the past 80 years. 


For those who feel the NYSE composite AD line is too polluted with non-operating companies these days to be valid, that issue will be covered in the future study.







Posts: 5,011
Reply with quote  #2 
Thanks Randy for this ratio adjusted angle of breadth of market.

We look forward to your future posts in this area.


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