The S&P 500 closed within 55 bps of a new all-time closing high today, so we wanted to see how breadth, as measured by the cumulative advance/decline (A/D) line, has been holding up as the index has been in an overall holding pattern for the last several weeks.  The chart below compares the S&P 500 (blue line, left axis) to the S&P 500’s cumulative A/D line (red line, right axis) over the last year.  For those unfamiliar with the indicator, the cumulative A/D line measures the net daily number of S&P 500 stocks rising and adds them to a running total.  With the two series practically on top of each other, breadth has been hanging right in there with price.  This implies that there are no negative divergences underneath the surface making the market vulnerable to a bigger decline.  That doesn’t mean that the market can’t fall from here, but instead that the internals aren’t suggesting any weakness.

S&P 500 AD Line 042215

Sector AD Line TableThe table to the right shows where the cumulative A/D lines of all ten sectors currently stand relative to their range of the last year.  Health Care has been the clear leader of the market this year, and its cumulative A/D line is currently right near the top of its range in the last year (99.6th percentile).  Health Care is also the only sector in the S&P 500 where cumulative breadth has hit a one year high in the last month.  Behind Health Care, the only two sectors where cumulative breadth is currently in a higher percentile than the S&P 500 are Technology and Consumer Discretionary.  While the fact that only three sectors have cumulative breadth readings that are closer to a 52-week high than the overall market may sound negative, when you consider the fact that these three sectors account for 47% of the S&P 500 by market cap , the current picture is a lot more balanced than it would first appear.

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