The NYSE’s Advance-Decline cumulative line is one of the best breadth indicators for the U.S. stock market. It adds the number of stocks that went up each day and subtracts the number of stocks that went down each day.

This is a long term leading indicator for the stock market.

The Advance-Decline cumulative line just made a new high even though the S&P 500 hasn’t. The Advance-Decline cumulative line hasn’t allowed the S&P’s pullbacks to push it down.

This is a medium and long term bullish sign for the stock market.

From a long term perspective

This previous study demonstrated that bull market tops are marked by bearish breadth divergences. With the cumulative Advance-Decline line making a new all-time high, this clearly isn’t the case right now.

2007

Breadth made a bearish divergence before the stock market topped.

2000

Breadth made a bearish divergence before the stock market topped.

1973

Breadth made a bearish divergence before the stock market topped.

1968

Breadth made a bearish divergence before the stock market topped.

Today

Breadth is making a BULLISH divergence today.

Medium Term

Breadth making a new all-time high means that the bull market in stocks is not over. There has yet to be a big bearish divergence in breadth. Meanwhile, the stock market’s range is starting to narrow. The stock market is making “higher highs” as if it is gearing up for a breakout.

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By Troy Bombardia

BullMarkets.co

I’m Troy Bombardia, the author behind BullMarkets.co. I used to run a hedge fund, but closed it due to a major health scare. I am now enjoying life and simply investing/trading my own account. I focus on long term performance and ignore short term performance.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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