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The following table contains data on market advances and declines
The following table contains data on market advances and declines.
DayAdvances Declines Day Advances Declines1 1,056 959 6 985 852 2 803 1,001 7 1,152 1,059 3 721 1,014 8 933 722 4 728 1,418 9 1,075 888 5 467 1,095 10 781 766
a. Calculate cumulative breadth. (Negative amounts should be indicated by a minus sign.)
b.Decide whether this technical signal is bullish or bearish.
Bullish
Expert Solution
a)
| Computation of Cumulative Breadth: | ||||
| Day | Advances | Declines | Net Advances | Cumulative Breadth |
| 1 | 1056 | 959 | 97 | 97 |
| 2 | 803 | 1001 | -198 | -101 |
| 3 | 721 | 1014 | -293 | -394 |
| 4 | 728 | 1418 | -690 | -1084 |
| 5 | 467 | 1095 | -628 | -1712 |
| 6 | 985 | 852 | 133 | -1579 |
| 7 | 1152 | 1059 | 93 | -1486 |
| 8 | 933 | 722 | 211 | -1275 |
| 9 | 1075 | 888 | 187 | -1088 |
| 10 | 781 | 766 | 15 | -1073 |
Net Advances = Advances - Declines
Cumulative Breadth = Current Year Cumulative Breadth + Next Year Cumulative Breadth
b) The signal is bearish as cumulative breadth is negative; however, the negative number is declining in magnitude, indicative of improvement. Perhaps the worst of the bear market has passed.
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