With some of the big intra-market moves we have seen in the last week to ten days, we thought it would be a good idea to provide a quick update of market breadth. In this case, we looked at the cumulative A/D line, which takes the difference between the number of advancing and declining issues each day and adding the result to the previous day’s value. In a healthy market, you want to see breadth either tracking or leading price, while periods where breadth lags and diverges from price is a red flag.
Take a look at the chart below for the S&P 500 where the blue line is the S&P 500’s price and the red line is the cumulative A/D line over the last year. Could the two lines be any more similar? Based on this measure at least, market internals remain healthy.