Monday, August 18, 2014

Market breadth – a big test coming:

I think the last time I looked at the NYSE advance / decline line was back on December 24th, 2013 when I tabled this description - “The Advance / Decline Line (AD line) is one of the most widely used indicators to measure the breadth of a stock market advance or decline. The AD line tracks the net difference between advancing and declining issues. It is usually compared to a market average where divergence from that average would be an early indication of a possible trend reversal.”

At that time the S&P500 was at all time highs and the NYSE A/D was still not confirming the recent advance - a sign of thinning leadership. Subsequently we got a shallow correction in late January 2014 and in mid February the A/D line broke to new highs and in May the S&P500 followed and broke to new highs. Now here we are - once again - with both the S&P and the A/D line rebounding from a late July swoon and running back up to the early July highs. This will be an important test because we need both to break to new highs in order to continue the 2014 advance.

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