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mortiz

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Reply with quote  #1 

As many serious students of daily breadth are aware, the NYSE daily Ratio Adjusted (RA) cumulative AD line is nearing its all-time high resistance posted in the March 1959. The SPX was around 55 and the Dow just over 600 in 1959, so what is the big deal?

 

One of the big deals is the NYSE RA-AD line serving as a measure of liquidity and the willingness of that liquidity to be risked in equities. Therefore, the daily RA-AD line approaching its all-time high of 1959 is telling us there is a lot of money out there willing to risked in equities.

 

There is another important long term ramification of the NYSE RA-AD line potentially exceeding its all-time high, and that is the RA-AD line's utility when conducting Elliott Wave (EW) counts.  IMHO, Fib laid out in one of the chat sessions, a very interesting theory in what a break of the all-time high in the RA-AD line might mean is terms of EW (Elliott Wave, not electronic warfare).

 

Here is an edited portion of the chat room transcript:

 

fib_1618: we are less than 5000 data points now from going to new all time highs on the RA NYAD those being the highs of 1959 (the year)


fib_1618: the importance of this breakout for those who don't know is that EW count wise this would make the current advance from the 2002 lows a third wave total structure from 1970's to 1980's lows


fib_1618: that being of "Primary" degree...maybe of "Cycle" degree but it would eliminate the label of "Intermediate"

fib_1618: and with it, this current price advance would not be a "Primary 5" advance
it would be the center point of Primary 3!


fib_1618: we know this because third waves will always have the greatest breadth and volume expansions compared with like time periods


fib_1618: so if the RA NYAD takes out the 1959 highs that would mean that the bottom seen either in 1932 or 1937 (depending on how you count it) would be part of Primary wave 1 of Cycle wave 3 and that topped out in the 1960's


fib_1618: Primary 3, therefore, would either have its starting point in 1974 or 1982 dependent on which chart you're looking at.  This would then open the door for a Primary wave 4 in the decade of 2010-2020, and then Primary 5 up after that!

 

As a review, below is a chart of the NYSE cumulative RA-AD line since the early 1950s illustrating the current RA-AD line assault on the all-time 1959 highs.

 

 

With any sustained upside surprises over the next couple weeks, the daily NY RA-AD record could fall.  For those interested in monitoring the RA-AD line over the next few weeks, the following table provides some information allowing you to track it on your own.

 

 

The data upon which these AD numbers are derived are from the Wall Street Journal (or Barrons) and have been for past 60+ years.  If you do not subscribe to WSJ or Barrons, the McClellans post the daily NYSE AD numbers daily on their web site:

 

http://www.mcoscillator.com/Data.html

 

Click on the "Today's Data" link and an Excel spreadsheet becomes available for calibrating the AD numbers with the data presented in this thread.

 

To derive the daily ratio-adjusted net advances, use the following recipe:

 

((Advances-Declines)/(Advances+Declines))*1000

 

The "1000" multiplier value is arbitrary, but must be used with the data presented in the above table.  Over the 80+ year history of daily AD numbers, the ratio multiplier of 1000 has been used to normalize the increasing number issues traded over the years to a "constant" of 1000 issues.

 

To convert the RA-AD net advances to raw net advances, the current rule of thumb is to multiply the difference of the all-time high: 166,190 and the current RA-AD line value by 3.2.  The result provides a close estimate of how many raw net advances remain to break the all-time RA-AD line high.

 

Hopefully this post doesn't jinx the current assault on the daily RA-AD line all-time high, but the good news is, where else other than TW does one hear this record discussed?

 

One other note, for those who keep bringing up the worthlessness of the daily AD line, we've heard all the arguments, and yes, we also monitor the weekly breadth data. 

 

FWIW 

 

Randy

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fib_1618

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Reply with quote  #2 
Thanks for the timely post Randy.

Some may also be asking where the raw and ratio adjusted NYUD line might be within this historical context. When and if you're able to, could you provide a historical chart on this data as well for further review?

Thanks in advance

Fib


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da_cheif

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Reply with quote  #3 
_".......center of primary wave 3 up".......registered and copyrited ......da cheif......circa 1982 to the present........
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mortiz

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Reply with quote  #4 

The available (to me at least) NYSE Up-Down (UD) volume data is from 1940. Below is an illustration of the NYSE cumulative Ratio-Adjusted (RA) UD volume line from 1940.

 

Circled is the approximate time zone in early 1959 when the NYSE all-time high for the RA-AD line was established.  As it does today, the UD line is more in step with price, but it must be noted with the AD data, every issue has an equal vote and is a measure of liquidity in the market place, while the UD volume data is skewed toward the higher cap, heavily traded issues.

 

The NYSE RA-UD line posted its latest all time high a week or so ago in step with NYSE Composite Index (NYA). As far a the more widely followed S&P 500 (SPX) index, the RA-UD volume led it to new highs in the late 70s, negatively diverged with the SPX new highs in 2000, and the RA-UD line is currently suggesting new all-time highs in the SPX going forward... dovetailing with cheif and Fib's center of primary wave 3 statements.

 

 

Zooming in on the NYSE RA-UD line, next is the action over the past eight or so years illustrating the negative divergence in late 1999 and early 2000, as well as the current positive divergence with the SPX.  Note the RA-UD line's orderly containment within the channel over the past nearly three years.

 

 

As a comparison to the ratio-adjusted UD line, next is the raw NYSE UD line (not ratio adjusted) over the past several years.  Note the raw UD line is not that far off in message from the ratio-adjusted UD line, since we are only comparing the last few years and there had not been an exponential increase in volume as when compared to over 10 or 15 years ago.  That is the reason why ratio adjusted techniques must be employed for longer term looks at this kind of data.

 

 

In summary, the last remaining NYSE related "unbroken" all-time high, whether price or cumulative internals, is the daily ratio-adjusted NYSE AD line.  It will be most interesting how prices react to the inevitable break of the all-time RA-AD line.

 

Maybe I'm looking in the wrong locations, but I am just not seeing much discussion of the NYSE RA-AD line all-time high being challenged other than at Technical Watch.  I would be willing to wager the market will recognize a clean break of the 1959 RA-AD line high.  .

 

FWIW

 

Randy

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fib_1618

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Reply with quote  #5 
Quote:
In summary, the last remaining NYSE related "unbroken" all-time high, whether price or cumulative internals, is the daily ratio-adjusted NYSE AD line.

Thank you Randy for posting these important longer term charts of the NYSE internals.

It's also good to see that the RA NYUD line is leading the RA NYAD line in all of this as this adds a tremendous weight of evidence as to the probable direction of the longer term price structure moving forward.

Fib


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"As for it being different this time, it is different every time. The question is in what way, and to what extent" - Tom McClellan

"An economist is someone who sees something happen, and then wonders if it would work in theory" - Ronald Reagan

"What we see depends mainly on what we look for" - John Lubbock

"The eye sees only what the mind is ready to comprehend" - Henri Bergson

“Answers are easy; it’s asking the right questions which is hard” - Dr. Who - 1977

"You know the very powerful and the very stupid have one thing in common - they don't alter their views to fit the facts, they alter the facts to fit their views (which can be uncomfortable if you happen to be one of the facts that needs altering)" - Dr. Who - 1977

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mss

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Reply with quote  #6 
Nice work!
Now I have to ask the dumb question. How does the number of unchanged shares and the total shares play into this picture? If they have no effect, why not. The number of unchanged is currently around 2%, but when large fast changes start it can run to 13% or more, not in the last few years tho. The other question that always bothers me is the up and down volume appears not to match with total volume. Am sure these are "kindergarten" type questions, but we calculate our numbers to the second and third decimal place, and are bypassing 2-4% of the data up front. The main point, if we are calling this a measure of liquidity, we are leaving out a chunk, IMO.
Again, nice work.
Scott
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mortiz

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Reply with quote  #7 

Scott,

 

Excellent questions regarding the unchanged issues and unchanged volume. As you suggest, the unchanged volume was a much larger percentage of the total volume when you consider data over ten years ago, it averages about 2.5% of the total volume over the past ten years.

 

Big moves either way in price are typically associated with smaller percentages of unchanged volume and AD numbers.  Obviously, unchanged volume and AD numbers can only be accounted for in ratio type analysis (advances - declines)/(advances+declines+unchanged), and I have taken a look at the unchanged only data and accounting for the unchanged data in the ratio related variants a few years ago.

 

You have brought up a good point and I will dust off some of those older experiments with unchanged issues/volume and report back when time allows.

 

For the volume data presented in the above table, it represents only the volume traded on the NYSE, not other exchanges.  Data vendors such as Yahoo include volume traded on NYSE listed issues from all exchanges; the difference between the NYSE only volume and the "all-exchange" volume is very significant. 

 

Since the data base I use for historical studies was derived from Barrons and WSJ (many decades worth), I continue to use the Dow Jones publications' data for consistency. The numbers they provide for the NYSE breadth and volume represent the trades on the NY exchange floor only, which is not even close to the total volume of NYSE listed issues traded on all exchanges.

 

If not before, will take a look at the ratio-adjusted data using unchanged issues over Christmas break.

 

Thanks

 

Randy

 

 

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