Assessing the Market's Technical Trend

There is a lot going on in this chart but if you spend some time with it, I think you will find it quite a useful study. The chart captures the daily volume flowing into advancing versus declining stocks on the NYSE. In a bullish trend, the majority of the volume (cash moving into and out of stocks) each day flows into stocks that are rising. Hence the Advance-Decline Volume Index ($NYUD) trends upwards. In a similar fashion, when the majority of the volume flows into declining stocks, the Index trend downwards. What is also quite interesting is that the Index tends to peak and trough ahead of price, which provides me with very timely information. The Relative Strength Indicator (RSI) and Momentum oscillator (MACD) provide further clues that help me assess the market’s future direction. In the chart, you can see that the RSI and MACD also tend to rise and fall ahead of price. These indicators are important technical factors that I pay attention to when assessing the strength of the market’s primary trend.


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