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:
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:
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.