A-D Line New High

When the NYSE’s A-D Line hits a new high, it conveys a clear message that liquidity is plentiful. The market might encounter other types of problems, such as investors’ emotions suddenly swinging, or a big news event rocking the market. But if liquidity is strong, the market can more easily recover from such problems.
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The DJIA has been in a concerted uptrend since making a final corrective low in February 2016. The DJIA’s upward progress has been in fits and starts, while the NYSE’s A-D Line has made a more steady uptrend. At several times, there were disagreements between the A-D Line making higher highs while the DJIA made lower highs, and in each case, the A-D Line turned out to be right about where both were going.
Trouble has historically come when there is a bearish divergence between the A-D Line and the DJIA. Here are some notable examples:

This post was published at FinancialSense on 02/03/2017.