[isatrader]

I reread chapter 8 last night, and I'm trying to get up to speed on the AD line signals. What's your interpretation of the FTSE AD line and what do the blue and red lines mean below the main graph?

Hi Shaun, the advance decline chart I showed for the UK market above shows the same data in three different ways.

1. The top part of the chart is the Cumulative Advance Decline Line.

2. The middle indicator in red is the Momentum Index which Stan explains on page 284 of the book. But is simply the 200 day moving average of the daily advances minus the declines and is used for long term signals when it crosses the zero line.

3. The bottom indicator in blue is the 10 Day Advance Decline Oscillator, and is basically a much faster version of the Momentum Index as it only uses the 10 day moving average of the daily advances minus the declines, and so gives a short term oscillator which highlights when the market is short term overbought or oversold, or in neutral territory as it is currently.

I hope that helps.