When it comes to market breadth, the advance-decline line is definitely one of my go-to indicators.
It calculates the net advancers. In other words, the number of advancing stocks minus the number of declining stocks.
This cumulative measure goes up and down over time, similar to the market indexes themselves.
Something to keep in mind is the fact that we use the “common stocks-only” advance-decline line because there are other vehicles that trade on the New York Stock Exchange, like closed-end funds for example.
If we’re analyzing the stock market, let’s stick to just stocks in our indicators.
Below are the new all-time highs for the NYSE Advance-Decline line, which is not evidence of any kind of downtrend.
This expansion of upside breadth continues to point towards higher stock prices for any sort of intermediate-term perspective.
If you’re looking to short U.S. stocks, this isn’t a reason to do it.
We’ve been approaching the market from the long sidethroughout all of 2019.
We’ve been focused on looking for risk-reward scenarios skewed in our favor.
I still think that is the best approach for the current market.
A World Filled with Lunatics
The noise can affect us all, but we don’t have to let it.
And I’m not just talking about the financial headlines this time.
Recently I’ve become aware of how some of my friends and colleagues are struggling with letting outside factors, even “internet trolls,” affect their trading decisions.
These are people who should be making millions of dollars, but instead are held back personally and professionally, in part, by the voices and opinions of angry commenters and smart-aleck strangers in their heads when deciding to put a trade on or not or make a decision for their business.
They’re worried about how other people perceive their decisions.
I see it every day.
I learned a long time ago not to worry about these people, specifically the trolls. Ignore them. Block them.
It’s a point my friend Phil Pearlman, and guys like Howard and “Downtown” Josh Brown hammered home to me when I started writing about the markets.
So, with my friends in mind, I caught up with Phil recently to talk about this, and he didn’t disappoint.
Phil has a doctorate in clinical psychology and has always been the person I turn to when I have questions about human emotions and cognitive behavior.
During our talk, he gave insight into the science of what’s taking place when a person actually has the time, and interest, to go out of their way to consume someone’s content, take the time to think about it and then go even further to publish angry and hurtful words about it.
There are psychological issues — narcissism, rage, frustration, etc. — that we discuss from both the perspective of the troll and the content producer who gets harassed.
It’s not really good for anybody. Phil goes back to the early days of StockTwits, when it was essentially a Tumblr site, and he was blocking angry commenters, who would then turn around and scramble their I.P. address just so they could comment on the platform again.
Our advice: Nourish the world instead of trying to starve it.
Click here to listen to my entire talk with Phil. I hope you enjoy.
And please let me know what you think. Email me (I welcome all comments!) at firstname.lastname@example.org.
To wise investing,
Editor, Big Market Trends