CADI (Cumulative Advance and Decline Index)

We all know that indexes (STI, UOB Sesdaq etc) are not very representative of the overall market sentiment. One better way is to use CADI, Cumulative Advance and Decline Index.

CADI is basically the accumulation of the differences between the numbers of rising and falling stock everyday. Today's difference is added to the accumulated number yesterday, and the result is plotting as new data point in the line chart.

The absolute reading of CADI is not important, but the direction of the line chart. Often, support and resistance can be drawn to see chang of trench.

Here is how CADI is plotted in Metastock (mine is version 8):

My data vendor (Econ) give 2 data files: Rises & Falls. I open The Downloader, click [File], [New], [Composite], create a file called CADI, point the primarily to Rises, Secondary to Falls, change to operator to subtract, then click [Create] and done (take note where is CADI data file is located as you will need to find it later).

Next, go to Metastock, [Tools], [Indicator Builder], [New], give the new indicator a name called CADI, the code is : Cum( C ) and [OK]

In Metastock, [File], [Open] (smart chart) and point the the newly created CADI file. Once opened, you will see many random dots. Next drop the newly created customized Indicator CADI into the window and you have the CADI line created. Delete the base security (dots) if you wish.

Reposting...


For quite some time now, it has been quite irritating that the SGX has gone
bonkers with their symbology. Stock whose names begin with S have been
assigned symbols beginning with T, then U, then V. The same problem is
happening with some other letters. The problem is made worst by the many
listings of structured warrants that use up symbols very quickly and then expire
after a few months. This makes SGX's lack of planning so glaringly awful in the
International arena. Why can't they just one more number to make it 999 per letter
instead of keeping to 99 that is now obviously insufficient.

I am finding it increassing difficult to locate some stocks since I use "traverse
destination folders". I am now beginning to use my own Downloader for SGX data
and am now deciding whether to still traverse destination folders but instead of
MetaStock Downloader's method of following symbols I can make my own baby to
traverse follwoing stock names. Therefore the two new stock that are listed today
with names beginning with "S" will still be posted to the "S" folders instead of
the "V" folder.

Currently I dump all the stocks into one folder and the 16 indices into another
folder.

While I am designing my own downloader, I am also thinking of parsing the file for
Total-Advance-Decline-Unchanged numbers and post them to a file with the Total
Issues going into the Open field, the Advance into the High field, the Decline into
the Low field and the Unchanged into the Close field, just like in CompuTrac.
Indicators can then be created to do the neccesssary calculation.

Naturally, Advancing Vol and Declining Vol are also possible and this can go into
the Volume and OpenInt fields.

I have been asked a number of times about the availability of historical AdvDec
numbers for SGX on the Internet. My replies were always that there was no source
for such historical numbers on the Internet. Such numbers would have to be taken
day-by-day off BT, Yahoo website or the local newspaper or teletext.

The problem is that even these sources do not gives the same numbers. There is
no consistency. Even the big name data vendors are also off the mark. You may
be wondering why I am saying this, whether I am in a position to say that they are
not getting it right. I will show you the proof.

I just tested some codes to parse the numbers. Firstly, unlike most sources
available, I discard the numbers from the warrants (both company issued and
structured) and the bonds and loan stocks. I would want to also discard the
numbers from multiple share group of the same company, example just taking the
numbers from SingTel1000 and discard SingTel10 and SingTel100 but there is no
easy way to do it with program codes that will not break when SGX make changes.

So although I know it is not right, I still take all their numbers.SGX had changed
the stock names and symbols of Singtel and that would have made the program
stopped working. As proof, SingTel symbols are now T48, T49 and T50. Yes you
see it right - T not S. They used to be S originally. Imagine then what happen
whenever SGX do this. The software codes will break. If I want to get into such
accuracy there is simply no way to ensure reliability of program codes other than
manually but this is not an option I would take. Too tedious.

The best I get out of today are the following numners:

Total Issues on SGX: 684
Advancing Issues : 143
Decling Issues : 150
Unchanged Issues : 203
Advancing Volume : 294,373,960
Declining Volume : 238,944,150

Bloomberg's are: Adv 256 - Dec 211 - Unch 239. See screenshot for teletext, BT
website and Yahoo. My number are nearer to Yahoo's.

Do you see the reasoning now?

I have always wonder why CADI has been dropping steadily through the years.
But I never have the correct data to work with.

I have just compiled the set of AdvDec numbers starting from 6Nov2003. Prior to
this date, SGX did not differentiate the type of listing so the numbers I wanted
could not be compiled.

The CADI line is still a downward decling line. There is something not quite right
with this study. I remember asking about this a few years ago and OChartist gave
a reply. I have no access to "that" forum now and do not have the desire to pay
just to access that forum so I won't be able to search it for things I contributed
there in the past.

csk:

Since my membership in that forum still yet to expire, I went back and located the posting where you questioned the validity of CADI discussed then on Jooz's homepage "Writings On The Wall".



Subsequently after getting the data file from Jooz and me, your tradestation still produce the same downward bias CADI chart.

Then a forumer called Gowani posted this:



And here is your reply:


(That forum had since upgraded to a new forum and many of those those old posting's charts are now missing, thus shown as [x])

That was followed by Jooz comment and later Ochartist chipped in.



This is about all I can find in that forum. Since it changed to a brand new forum format this July, all the old postings are stuffed away, on longer searchable. So I was unable to do a locate more.

Since CADI has been consistently on downward bias, I has come out with the following work around to ease interpretation.

First of all, I was thinking that since that downward bias is a norm for CADI, than a MA that runs through the CADI should represent the major trend of CADI, and any deviation from this MA is viewed as more bullish or bearish than the norm. So I come up with MACD of CADI itself. Here is the chart where CADI (thick green line) is overlay onto its MACD:



Not exactly overcoming the problem, but can aids reading the change in market sentiment.

(HC Note: Edited on 2006-08-09 to fix the broken image link)

Thanks HC,

These were the postings. I would not have participated and spent precious time in
that forum if I had known few years ago or rather if I was that bit smarter to
foresee that that forum would NOT always remain free and therefore I would not
be able to reference any contributions I had made there.

So it was Gowani who replied. My memory is failing. He made a very good point
(stocks drip) and what Jooz said about the SGX (hollow market) was also valid.

I tend to think that the SGX indices are skewed towards the heavy weights. So
when the heavt weights rise so too the indices. But the number of heavy weights
is small in number compared to the total listed companies. Therefore the
perpectual declining CADI.

This was why I started to dislike the STI last year when they dropped some
component stocks in favour of a few more that coincidentally happened to have
risen strongly before their inclusion to further skew the index.

I checked the AD-Line (the more common name in the US in place of CADI) for
NYSE against S&P500 and it still looks normal for recent years. The AD-line
started to decline in Apr of 1998 and continue falling until end-2000, after the US
market has topped out. At the current time, it is rising steadily. There is nothing
wrong there with the AD-Line so by this reasoning there is also nothing wrong
here with the CADI.

Maybe a CADI for specific indices using only the component stocks might narrow
down the picture but is this a good thing to do? Maybe good only if one only want
to track only these stocks. In the total picture, a hollow market is still a hollow
market no matter how one try to make it look good through the indices.

The reasoning behind the CADI is very sound and continues to be a good
barometer of the overall market, not a narrowly selected basket. One can be
deceived by rising stock indices that the overall market is doing well but the CADI
will say otherwise.

I have just recompiled the Adv-Dec numbers again from 1999 this time I am able
to discard both company issued warrants and structured warrants (if there were
any) prior to 6Nov2003.

I wanted to see whether there would be any difference if I use advancing and
declining volume instead of issues. Also since I am recompiling I thought I might
as well also do the advancing and declining dollar value volume in SGD,
converting all dollar value that are in foreign currentcy to SGD using respective
mean exchange rates. The reason being penny stocks usually have extraordinary
high volume because of their low price while high priced stocks (usually blue chips)
usually have smaller volume numbers but not neccessary dollar value volume.

The resultant indicators are show in the chart below. The formula for calculating
Cummulative Volume Index (CVI) is the same for CADI.

While CADI shows that there is a steady decline, both CVI show steady advance
even during downtrend. This is confirmation that people are generally on the buy
side all the time. So even durung bear market, they are always looking to buy.

All look very normal for the Singaporean buy-only mentality.

With SGX going to charge for user access it is perhaps time to direct resources
elsewhere. SGX is now a listed company which means there have to be profit
orientated. Charging for access fees I can tell you they are going to kill
themselves. They like to cite other exchanges are charging but do they realise
that SGX's quality in listed stocks, market breadth, market depth, market
sophistication and order system is nowhere near these exchanges. Over in
derivative trading, over the years, one by one their contracts died. What's left
now, sir? Is this yet another idea from foreign talent?

Go ahead implement the fees and see what happen. Twisting a phrase from
WWE's John Cena - You Can't Hear Me.




Edited on 16Sep2005 2nd paragraph:
"using respective mean exchange rates" from "using a mean exchange rate"

We would appreciate it if you could include CADI ASCII data in your TAR website for daily downloading. Thanks.

Hi Golden,

I have just posted a reply in the Historical & EOD Data Provider & Vendors thread:

http://s7.invisionfree.com/ChartistsUnited...dpost&p=2789814