Even though the S&P 500 has closed at an all-time high three times in the last week, investors are still waiting for breadth, as measured by the cumulative A/D line, to confirm the new high. The chart below compares the S&P 500 and the index’s cumulative A/D line over the last twelve months. While the two have essentially tracked each other step for step in the last year, ever since both indices hit new highs on 2/24 (gray box), the S&P 500’s cumulative A/D line has yet to take out that high. As shown in the enlarged section of the chart, even as the S&P 500 traded to new highs in the last several weeks the S&P 500’s cumulative A/D line had been making a series of lower highs. In the most recent push higher, though, the cumulative A/D line has broken out of that rut and is now within spitting distance of a new high. In fact, if the S&P 500 sees an afternoon rally here, there’s a good chance it could make a new high today.
Taking a longer term perspective of the S&P 500’s cumulative A/D line, the current stretch of 61 trading days without a new high is the fourth longest drought of new highs in breadth for the entire bull market and the longest in nearly three years (December 2013). At 61 days, though, the current drought of new highs in breadth has a ways to go before getting anywhere near the length of the three prior streaks. Finally, one unique aspect of the current drought of new highs in breadth relative to the prior periods is that in this period we did not see a big whoosh down in breadth at the start of the streak that the market had to dig itself out of. Instead, it was a slow bleed lower followed by back and forth action.