Once again, MarketVolume® is one step ahead of the competition. Right now, our development team put the finishing touches on our new Indexes charts. MarketVolume® is the only source of real-time intraday index volume and advance / decline charts for major US indexes and exchanges. Now, we are raising the bar even further. From now on you may monitorAbsolute Breadth Index and Breadth Trust for U.S. indexes and Exchanges.
ADX (Absolute Directional Index)
The Average Directional Index (ADX) was developed by J. Welles Wilder to evaluate the strength of a trend and to define period of sideway trading.
The ADX is an oscillator that fluctuates between 0 and 100, however reading above 60 are relatively rare. In technical analysis ADX is compared to two levels:
- ADX readings below 20 indicate weak trend;
- ADX readings above 40 indicate strong trend;
The ADX in the Directional Movement system. The higher the ADX value - the stronger the trend. The technical analysis rules state that trend follow systems could be used when ADX is above 25 and when ADX drops below 20 then trend following systems are not recommended for use.
For more info read "ADX" description.
ADXR (Absolute Directional Rating)
ADXR stands for Average Directional Movement Index Rating ADXR is a component of the Directional Movement System developed by Welles Wilder. This system attempts to measure the strength of price movement in positive and negative directions, as well as the overall strength of the trend.
There are several ways of using ADXR:
- The ADXR can be used in the same was as the ADX is used in the Directional Movement system. The technical analysis interpretation is the same as the ADX: the higher the value, the stronger the trend. It results in more conservative trading signals. The ADXR can be used to determine if price movement is sufficiently directional to be worth trading. Welles Wilder's rule is to use trend following trading systems when ADXR is above 25 and when ADXR drops below 20 then do not use a trend following system.
- ADXR is a lagging indicator that behaves like an Averaged ADX. Furthermore, the ADXR would generate signals after the ADX. In some cases ADXR is used as a signal line applied to ADX. A buy signal occurs when ADX crosses above ADXR, and a sell occurs when ADX crosses below ADXR.
For more info read "ADXR" description.
DMI (Directional Movement Index)
The Directional Movement Index (DX) was developed by J. Welles Wilder of to evaluate the strength of a trend and to define periods of sideway trading.The Directional Movement Index calculations are based on positive Directional Index (+DI) and negative Directional Index (-DI) - you may see the detailed calculation example inADX description.
In most cases Directional Movement Index is used on charts as ADX (Average Directional Movement Index) combined with positive and negative directional indexes. In this case in addition to the ability to use DX or ADX to define strength of a trend, positive and negative directional indexes could be used to generate signals. In its most basic form, buy and sell signals can be generated by +DI and -DI crossovers. In technical analysis it is considered that a buy signal occurs when +DI moves above -DI and a sell signal when -DI moves above the +DI. However, a traders should be aware that when an analyzed security is in a trading range (ADX or DX is below 20), this trading system may produce many false signals and whipsaws.
As with most technical indicators, +DI and -DI crosses should be used in conjunction with other aspects of technical analysis. Since Directional Index is based on the price, the volume based technical analysis could be recommended as a partner to this indicator in atrading system.
For more info read "DMI" description.
ABI (Absolute Breadth Index)
The Absolute Breadth Index (ABI) was developed by Norman G. Fosback and described in his book "Stock Market Logic". The ABI is market indicator that is used in technical analysis to determine volatility levels in the market without factoring in price direction. Referred to as a market momentum indicator, the absolute breadth index (ABI) is equal to the absolute value of the difference between the advancing issues and the declining issues. It shows how much activity and volatility and change is taking place on the NYSE or any other index and corresponding market sector.
Typically, large ABI numbers suggest volatility is increasing, which is likely to cause significant changes in stock prices in the coming weeks. If the ABI index readings have low value it point that no changes are taking place. Fosback found that a highly reliable variation of the ABI is to divide the weekly ABI by the total issues traded. If after 10 weeks moving average is calculated and readings are less than 15% they are called "bearish". Readings higher than 40% are called "bullish".
For more info read "Absolute Breadth Index" description.
Breadth Trust
The Breadth Thrust indicator was developed by Dr. Martin Zweig and is considered as a market momentum indicator. Traditionally the Breadth Thrust is calculated by dividing a 10-day exponential moving average of the number of advancing issues, by the number of advancing plus declining issues. Breadth thrust is an internal indicator that is somewhat more complicated. It is a ratio of moving averages that creates an excellent judge of market momentum.
In technical analysis Breadth Thrust can be read just like a stochastic or RSI, where overbought and oversold levels are at the extremes. Divergence with the underlying price chart points to weakening momentum. The number of days to set for the moving averages should be determined by the time-period being evaluated.
According to Dr. Zweig a "Breadth Thrust" occurs when, during a 10-day period, the Breadth Thrust indicator rises from below 40% to above 61.5%. A "Thrust" indicates that the stock market has rapidly changed from an oversold condition to one of strength, but has not yet become overbought. Dr. Zweig also points out that most bull markets begin with a Breadth Thrust.
For more info read "Breadth Trust" description.
