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The Complete Guide to Market Breadth Indicators 00Morris-FM 8/11/05 5:57 PM Page Ii 00Morris-FM 8/11/05 5:57 PM Page Iii 00Morris-FM 8/11/05 5:57 PM Page i The Complete Guide to Market Breadth Indicators 00Morris-FM 8/11/05 5:57 PM Page ii 00Morris-FM 8/11/05 5:57 PM Page iii The Complete Guide to Market Breadth Indicators How to Analyze and Evaluate Market Direction and Strength Gregory L. Morris McGraw-Hill New York Chicago San Francisco Lisbon London Madrid Mexico City Milan New Delhi San Juan Seoul Singapore Sydney Toronto 00Morris-FM 8/11/05 5:57 PM Page iv Copyright © 2006 by The McGraw-Hill Companies. All rights reserved. Printed in the United States of America. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or dis- tributed in any form or by any means, or stored in a data base or retrieval sys- tem, without the prior written permission of the publisher. 1 2 3 4 5 6 7 8 9 0 DOC/DOC 0 9 8 7 6 ISBN 0-07-144443-2 McGraw-Hill books are available at special quantity discounts to use as pre- miums and sales promotions, or for use in corporate training programs. For more information, please write to the Director of Special Sales, Professional Publishing, McGraw-Hill, Two Penn Plaza, New York, NY 10121-2298. Or con- tact your local bookstore. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. —From a Declaration of principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers. This book is printed on recycled, acid-free paper containing a minimum of 50% recycled, de-inked fiber. Library of Congress Cataloging-in-Publication Data Morris, Gregory L., 1948- The complete guide to market breadth indicators / by Gregory L. Morris. p. cm. Includes bibliographical references and index. ISBN 0-07-144443-2 (hardcover : alk. paper) 1. Investment analysis. 2. Stock price forecasting. 3. Stocks—Prices— Mathematical models. I. Title. HG4529.M675 2005 332.63’2042—dc22 2005005850 00Morris-FM 8/11/05 5:57 PM Page v To Laura 00Morris-FM 8/11/05 5:57 PM Page vi 00Morris-FM 8/11/05 5:57 PM Page vii Contents List of Charts, Tables, and Figures ix Foreword by John Murphy xv Preface xvii Acknowledgments xix Chapter 1 Introduction 1 Chapter 2 Necessary Breadth Information 11 Chapter 3 Breadth Indicators 19 Chapter 4 Advance Decline Difference Indicators 31 Chapter 5 Advance Decline Ratio Indicators 91 Chapter 6 Advance Decline Miscellaneous Indicators 109 Chapter 7 New High, New Low Indicators 131 Chapter 8 Up Volume, Down Volume Indicators 163 Chapter 9 Composite Indicators 195 Chapter 10 The McClellan Indicators 243 Chapter 11 Putting Breadth to Work 255 Chapter 12 Conclusions 263 vii 00Morris-FM 8/11/05 5:57 PM Page viii viii Contents Appendix A Indicators and Trading Systems— What’s the Difference? 271 Appendix B Time Frames for Analysis 277 Appendix C Miscellaneous Information 281 Bibliography 285 Index 287 00Morris-FM 8/11/05 5:57 PM Page ix List of Charts, Tables, and Figures Chart 1–1 Advances, Declines, and Unchanged, all as a Percentage of Total Issues. Chart 1–2 New Highs and New Lows as a Percentage of Total Issues. Chart 1–3 Up Volume and Down Volume as a Percentage of Total Issues. Chart 3–1 Advances and Declines. Chart 3–2 Advances and Declines Adjusted for Total Issues. Chart 3–3 New Highs and New Lows. Chart 3–4 New Highs and New Lows Adjusted for Total Issues. Chart 3–5 Up Volume and Down Volume. Chart 3–5b Up Volume and Down Volume Plotted Using Semilog Scaling. Chart 3–6 Up Volume and Down Volume Adjusted for Total Volume. Chart 4–1 Advances Minus Declines Smoothed by 21 days. Chart 4–2 Advances Minus Declines Exponentially Smoothed by 3 days. Chart 4–2b Advances Minus Declines Exponentially Smoothed by 3 days with ϩ1000 and Ϫ1000 zones. Chart 4–3 Advances Decline 10 and 30 Smoothed Difference—Mamis. Chart 4–4 Advance Decline Overbought Oversold. Chart 4–5 Advance Decline Overbought Oversold with Levels at ϩ400, ϩ150, Ϫ150, and Ϫ400. Chart 4–6 Advance Decline Technique—Lindsay. Chart 4–7 Advance Decline—Kinsman. Chart 4–8 Plurality Index. Chart 4–9 Plurality Index with New Zones. Chart 4–10 Fugler Three-Day Advance Decline Technique. Chart 4–11 Advance Decline Line. Chart 4–12 Advance Decline Line Nonconfirmation—1987. Chart 4–13 Advance Decline Line Nonconfirmation—1998. Chart 4–14 Advance Decline Line Divergences. Chart 4–15 Advance Decline Line—Weekly. ix 00Morris-FM 8/11/05 5:57 PM Page x x List of Charts, Tables, and Figures Chart 4–16 Momentum Index—Weinstein. Chart 4–17 1% Advance Decline—Swenlin. Chart 4–18 Eakle Advance Decline Index. Chart 4–19 Eakle Advance Decline Index—Weekly. Chart 4–20 Advance Decline Line Normalized—5 days. Chart 4–21 Advance Decline Line Normalized—21 days. Chart 4–22 Bolton Advance Decline Line. Chart 4–23 Bolton Advance Decline Ratio—21-day Smooth. Chart 4–24 Advance Decline Line Adjusted for Total Issues. Chart 4–25 Big Movers Only—35 Percent. Chart 4–26 Big Movers Only—50 Percent. Chart 4–27 Advance Decline Line Oscillator. Chart 4–28 Advance Decline Line Oscillator—Appel. Chart 4–29 Absolute Breadth Index—50-day Smooth. Chart 4–30 Absolute Breadth Index—21-Day Smooth with 300 and 1100 Levels. Chart 4–31 Absolute Breadth Index—21 day with 250 and 600 Levels. Chart 4–32 Absolute Breadth Index Adjusted by Total Issues—21-day Smooth with 10 and 30 Levels. Chart 4–33 McGinley Advance Decline (AD) Power. Chart 4–33b Weekly McGinley AD Power. Chart 4–34 Coppock Breadth Indicator. Chart 4–35 Haurlan Index—Short-Term. Chart 4–36 Haurlan Index—Intermediate-Term. Chart 4–37 Haurlan Index—Long-Term. Chart 4–38 McClellan Oscillator. Chart 4–39 McClellan Summation Index—Traditional. Chart 4–40 McClellan Summation Index—Miekka. Chart 4–41 McClellan Summation Index—Swenlin. Chart 4–42 McClellan Summation Index—Pring. Chart 4–43 Merriman NYSE Breadth Model. Chart 4–44 Swenlin IT Breadth Momentum Oscillator. Chart 4–45 Swenlin Trading Oscillator—Breadth. Chart 4–46 Zahorchak Method—Daily. Chart 4–47 Zahorchak Method—Weekly. Chart 5–1 Advance Decline Ratio—1965–2004. Chart 5–2 Advance Decline Ratio—1996–2004. Chart 5–3 Breadth Thrust. Chart 5–4 Breadth Thrust with Simple 10-day Smooth. Chart 5–5 Breadth Thrust with Exponential 8-day Smooth. Chart 5–6 Breadth Thrust Continuation Chart 5–7 Duarte Market Thrust—Weekly. Chart 5–8 Eliades Sign of the Bear. 00Morris-FM 8/11/05 5:57 PM Page xi List of Charts, Tables, and Figures xi Chart 5–9 Hughes Breadth Momentum Oscillator. Chart 5–10 Hughes Breadth Momentum % Oscillator. Chart 5–11 Panic Thrust. Chart 5–12 STIX—Short-Term Trading Index. Chart 5–13 STIX—with 10-Day Smooth. Chart 6–1 Schultz Advances/Issues Traded Ratio. Chart 6–2 Schultz Advance/Total Issues—Smoothed. Chart 6–3 Advance Decline Divergence Oscillator. Chart 6–4 Advance Decline Diffusion Index. Chart 6–5 Breadth Climax. Chart 6–6 Declining Issues TRIX. Chart 6–7 Advancing Issues TRIX. Chart 6–8 Disparity between NYSE Index and Advance Decline Line. Chart 6–9 Disparity Index. Chart 6–10 Walter Heiby Dynamic Synthesis. Chart 6–11 Walter Heiby Dynamic Synthesis as a Percentage of Total Issues. Chart 6–12 Walter Heiby Dynamic Synthesis Indicator. Chart 6–13 Unchanged Issues. Chart 6–14 Unchanged Issues—21-Day Smooth. Chart 6–15 Unchanged Issues as a Percentage of Total Issues. Chart 6–15b Unchanged Issues/Total Issues—1987. Chart 6–16 Velocity Index. Chart 7–1 New HighsϪNew Lows—21-Day Smooth. Chart 7–2 New Highs, New Lows Percent Total Issues—Hayes. Chart 7–3 New Highs, New Lows Line. Chart 7–4 New Highs, New Lows Line—21-Day Smooth. Chart 7–5 New Highs and New Lows Oscillator. Chart 7–6 New Highs and New Lows Oscillator—Appel. Chart 7–7 New Highs, New Lows—Morris. Chart 7–8 High Low RSI. Chart 7–9 High Low Stochastic. Chart 7–10 New Highs, New Lows Ratio—21-Day Smooth. Chart 7–11 New Highs, New Lows Ratio—10-day Smooth. Chart 7–12 New High, New Low—Cohen. Chart 7–13 New Highs, New Lows Ratio—Merrill. Chart 7–14 Weekly New Highs—Hayes. Chart 7–15 New Highs—Hayes. Chart 7–16 New Highs and New Lows Cross. Chart 7–17 New High, New Low Cross—10-Day Smooth. Chart 7–18 New Highs, New Lows—Burk. Chart 7–19 New Highs Percent Total Issues. Chart 7–20 New Highs Percent Total Issues Rate of Change. Chart 7–21 Weekly New Highs, New Lows—Hayes. 00Morris-FM 8/11/05 5:57 PM Page xii xii List of Charts, Tables, and Figures Chart 7–22 New Lows Percent Total Issues. Chart 7–23 New Lows Percent Total Issues Rate of Change. Chart 7–24 High Low Logic Index. Chart 7–25 High Low Logic Index—Weekly. Chart 7–26 High Low Logic—Appel. Chart 7–27 Low High Logic Index. Chart 7–28 High Low Validation Index. Chart 8–1 Up Volume—21-Day Smooth.
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