Market breadth – Even More Worry Now:

Just the repeat once again on market breadth “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.”

The last time we looked – a few days ago with the S&P500 at all time highs - the NYSE A/D was still not confirming the recent advance - a sign of thinning leadership. Now on Friday the Standard & Poor’s 500 Index fell from a record, while small-cap shares sank and Alibaba Group Holding Ltd. rallied in its debut. Commodities declined to a five-year low and the U.S. dollar advanced pushing Gold to an eight-month low, while silver hit the cheapest level in four years.

The breadth problem is still acute as displayed in our latest NYSE A/D line chart. Now we see the S&P500 (last Friday) at an all-time high and the lower A/D Line failing to break above their respective July 2014 highs – it is still to early to call a breakdown – but we need the A/D line to hold at the early August lows to complete a shallow A-B-C type correction.