Whenever the S&P 500 makes a new high or low, we like to look at internal market indicators for signs of confirmation or divergence.  One such indicator we track is the S&P 500 Cumulative A/D line.  For those unfamiliar with the cumulative A/D line, simply put is a rolling total of the daily net number of stocks rising on a given day.  To calculate it, each day we subtract the number of stocks that trade up on the day minus the number that trade down and then take that number and add it to the total from the prior day.  With the S&P 500 making to marginal all-time closing highs in the prior two trading days, we wanted to update where this indicator currently stands.

The chart below shows the cumulative A/D line of the S&P 500 over the last year overlaid on a chart of the S&P 500’s price.  Looking at how the two have moved over the last year, breadth has tended to track price pretty closely.  Both price and breadth both made new bull market highs and then consolidated over the next two months.  Then, last Friday, the S&P 500 finally took out that prior, albeit marginally.  The cumulative A/D line, however, has yet to take out its prior high and remains 245 below its prior high.  Granted, the S&P 500 only took out its prior highs by 0.14%, but as of yet, there has still been no confirmation of the new high.  While not something to be concerned about at this point, if the S&P 500 rallies up above 2,420 and we still don’t see breadth confirm the high, it would become more of a concern.  We’ll be watching!

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Sector AD Line 050917

 

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