As we highlighted in yesterday’s Chart of the Day as well as in our Sector Snapshot, the S&P 500’s 10-day advance decline (AD) line reached a record low at yesterday’s close. The 10-day AD line essentially measures the percentage of stocks in the S&P that have risen or fallen on a daily basis over a 10-day span. While the broad index saw its 10-day hit a record low, it was not alone. Real Estate (which admittedly has a smaller history of data only going back the past six years) and Technology also saw record low readings while a number of other sectors came close to records as well. As shown below, Materials had the fourth lowest reading, Energy and Industrials had the third lowest, and Health Care had the runner up lowest reading on record. For most sectors, these are readings that are well over 3 standard deviations below the norm since our data begins in 1990.
Additionally, the weak readings are somewhat unusual when compared to other bear markets. As shown, historically the 10-day AD lines of defensive sectors (Consumer Staples, Health Care, Real Estate, and Utilities) as well as Energy have averaged positive readings during bear markets. That is far from the case at the present moment with the strongest reading coming from Consumer Staples, however, even that reading is over 2 standard deviations lower than normal and ranked as the 121st worst reading of all trading days since at least 1990.
Pivoting over to a longer run look at breadth, the cumulative AD line has been confirming the moves in price with the line plummeting down towards the spring lows. That comes after the AD line went on a much stronger run than price during the late spring/summer rally.
Once again comparing the breadth line to past bear markets, below we show the path of the cumulative AD line over the course of each bear market since 1990. At the moment, the current bear is the third longest in terms of time, but the cumulative AD line is not quite at as low of a level as other bear markets. For example, the 2020 bear market as well as the 2007 to 2008 bear markets saw much lower readings and consistent moves lower than has been observed this year. At the highs this summer, the line even managed to move into positive territory. Click here to learn more about Bespoke’s premium stock market research service.
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