Stocks are sold. Is this the start of the bear market, or is it just a long, missed retreat?
Traders try to predict market behavior indicators. Some metrics have been developed. Others are simple. Over time, the simple ones are more useful.
This may be surprising. Many people think that Wall Street uses sophisticated tools to earn money. This.
We can not compete individually with sophisticated techniques. Therefore, daily traders tend to lose money. Wall Street companies are trading in nanoseconds, and our data transmission channels are not able to process information quickly.
Large Wall Street companies, however, use simple tools to get the money. Many long-term trend tracking strategies use simple ideas. And we can use the same tools to drive big stock market trends.
The Forward Line
One of the tools that many large companies use is the forward-looking line. The predictive line marker will subtract the number of days closed (Decrease) from locked numbers (advances).
If the market action is significantly reduced before the S & P 500 was lower, the AD line was dropped in all cases. This has been done on bear markets that led to losses of 50% or more in 1972, 1999 and 2007. This was even before the collapse in 1987.
The AD line simply counts how many sets are passing. In a bull market we expect most stocks. In the bear market most stocks have to be stopped. This is a simple idea, but as the tables show, this is an important indicator.
Near the nearby markets we see less inventory. The index rises because only a few large stocks produce profits.
In 2007, household stocks and financial position continued to rise, as most stocks reached its peak.
In 1999, online stocks were market leaders, while most stocks turned down.
In 1987, dealers bought only the largest stocks for a portfolio insurance strategy. This insurance was spectacularly in October.
In 1972, Nifty Fifty became popular and investment managers bought only the top 50 companies.
Strict buying always results in sales. This means that we need to pay attention to the AD line for the warning sign of the next bear market.
The S & P 500 and Advance-Decline lines are in sync. As long as they remain in sync, the bear market is unlikely. We can return to between 5% and 10%. But this will be a chance to buy more stocks and prepare for the next uplift.