The Advance/Decline Line by Mike Burk
The advance/decline line, used with the volume percentage ratio and the new high/new low indicator, two indicators I've developed, helps me distinguish cycles in the Dow Jones Industrial Average (DJIA) and other indices. The advance/decline line (ADL) is simply a plot of the running total of the number of issues that advanced in price minus the number of issues that declined in price. I tried improving on this traditional formula — by calculating percentages, by factoring in the number of unchanged issues, by considering each datum separately and by calculating oscillators, both exponential and arithmetical, of all lengths — without success. Advance/decline lines can be drawn using either weekly or daily data, but in this article I will use only daily data.
Both graphic and numerical study of the ADL have merit. Graphically, I plot the ADL in the same frame with the DJIA, with both highs and lows for the period at the top and bottom of their scales, respectively. When either hits a new high or new low for the period, its scale is redrawn to accommodate the new value.