Many stock index traders find it valuable to monitor overall market conditions, strong and weak sectors, etc., and not just the particular market being traded on a given day. Often market sectors do not reverse at the same time. And by seeing weakness in, for example the Russell 2000, you can get an early warning for a reversal affecting your S&P 500 position. SPAD AD Spectrum allows you to monitor advance-decline changes in five different index markets in a small, color-coded display. What is strong, what is weak, which is leading the market and which is lagging, etc.
Each row represents the bar-by-bar statistics for an index. Markets included, from top to bottom, are as follows:
Dow Jones Industrial Average
Standard & Poors 500
Standard & Poors Midcap 400
SPAD AD Spectrum is simple to use. Just add it to your chart. It automatically acquired the necessary datastreams from TradeStation servers without you having to add additional data to your chart.
SPAD AD Line is a powerful toolbox for advance-decline and up-down volume line analysis. The Advance-Decline Line has long been used to analyze the underlying strength of the stock market when applied to daily charts. With TradeStation it had traditionally been complicated to apply, due to needing to add multiple hidden datastreams to the chart. SPAD AD Line solves all that.
And additionally, it extends the functionality beyond its traditional usage, with intraday analysis and other new features.
The traditional advance-decline line indicator is applied to daily charts. It is a cumulative index, constructed by taking the advancing issues for a day and subtracting the declining issues. This net advancing or declining value is then added to the running total from previous days.
As you can see above, using the cumulative methodology you transform the daily advances-declines statistic from a momentum-type measure, to a price-equivalent trend measure. Traditionally, traders have looked to the advance-decline line as a confirming indicator for price action. For example, when prices are increasing but on fewer issues (as evidenced by a weaker advance-decline line, the trend may be nearing its end. Usually, the advance-decline line is less volatile than its equivalent price series. For a trend follower, this means it can be used to keep you in trades longer than if your trend analysis is based on price alone.
Up volume - down volume analysis is done exactly the same way, except that the volume on the advancing and declining issues is used rather than the numbers of issues. Up-Down Volume lines are even smoother than advance-decline lines, making them also the trend follower's friend. Volume analysis can be a little tricky sometimes though, more so than advance-decline analysis. For example, say the market is going up and reverses strongly mid-day. Selling volume on stocks that are still up for the day will make the up-down volume line continue higher, even as prices fall. Only when stocks turn from positive to negative on the day will the selling volume show negative.
Advantages of SPAD AD Line
Simple Menu Setup
No need to add extra datastreams to your chart.
Automatic Data Selection Option
Using this option, the indicator chooses appropriate data automatically, based on the data on your chart. This is great for cycling through a series of charts.
Meaningful current values
The way cumulative advance-decline analysis is typically done, the current value of the indicator means absolutely nothing. SPAD AD Line adds additional processing to set the current indicator value to the current day advance-decline value.
Daily or Intraday Analysis
Intrabar OHLC/candle display
Unlike cumulative advance-decline analysis of the past, SPAD AD gives you historically accurate intrabar highs and lows for the data, not just closing values.
Built-in Indicator-on-Indicator Analysis Techniques
The McClellan Oscillator and Summation Index have been used for decades as a measure of the underlying strength of the market.
Traditionally, these tools were applied to advancing and declining issues of the exchanges, and in particular to the NYSE. SPAD AD's Oscillator and Summation Index broaden scope of the indicators to include a) up volume - down volume analysis plus b) all the indices and exchanges available in SPAD AD Line. It also includes the "automatic" function like AD Line, permitting you to easily scroll through a series of charts and the indicators will pick the appropriate underlying market breadth data.