The Advancing-Declining Issues is a market momentum indicator which shows the difference
between stocks listed on the New York Stock Exchange that advanced in price minus those
that declined. As of this writing, about 2,500 issues trade each day on the NYSE.
The difference between the number of advancing and declining issues is the foundation of
many market breadth indicators. These indicators include the Advance/Decline Line,
Advance/Decline Ratio, Absolute Breadth Index, Breadth Thrust, McClellan Oscillator and
Summation Index. Indicators that use advancing and declining issues in their calculations
are called market breadth indicators.
The Advancing-Declining Issues indicator shows the difference between the number of
advancing issues and the number of declining issues. Plotted by itself, this indicator is
helpful to determine daily market strength. Strong up days generally show readings of more
than +1,000. Very weak days have readings of less than -1,000.
I prefer to plot a 5-to-40 day exponential moving average of the Advancing-Declining
Issues rather than the daily values themselves. The moving average creates an excellent
short-term overbought/oversold indicator. Both the
Over-bought/-Oversold indicator and the
McClellan Oscillator are created using moving averages of
advancing minus declining issues.
The following chart shows the DJIA and
a 40-day moving average of the Advancing-Declining
I drew "buy" arrows when the moving average rose above -50 and "sell"
arrows when it fell below 125. Normally, I would use -100/+100, but the strong up-trend during
this period caused the indicator to have an upward bias.
The Advancing-Declining Issues is calculated simply by subtracting the number of declining
issues from the number of advancing issues.
The following table shows the calculation of the Advancing-Declining Issues.