Planning the Next Market Swing from Advance Decline Breadth

Apr 11, 2016: 3:23 PM CST

What message is Breadth sending us about the next likely swing for the stock market?

Let’s take a look and compare the current message with a similar situation from late last year.

In the chart above we’re seeing the NYSE Advance Decline (Advancing Issues minus Declining Issues) in the middle along with the Volume Difference (VOLD) of Breadth (bottom chart).

I think the message is clearer from the lower VOLD (Volume) chart but let’s examine it all.

First, let’s trace the similar upside rally in the Dow Jones from October to November 2015.

That strong rally terminated into 18,000 on clear negative divergences (red arrows) in Breadth (internals).

However, the market didn’t roll-over or reverse instantly; instead, price traded sideways until breaking lower in January 2016.

Now a similar sell-swing and almost identical rally higher (see prior update) takes us back not only to the 18,000 level, but also a similar situation in price and Breadth.

Breadth has declined (diverged) during the entirety of the February to April rally and we can see the divergence clearer in the VOLD chart.

If history is our guide, Breadth tells us to be cautious going into a likely sideways range-bound future at best or even another type of retracement yet to come.

To see a breakout strongly above 18,000, we would need to see a strengthening of market internals and Breadth.

Don’t rule out the breakout scenario, but for now it’s the lower-probability outcome for the immediate future.

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Corey Rosenbloom, CMT

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2 Comments

2 Responses to “Planning the Next Market Swing from Advance Decline Breadth”

  1. Stepping Inside Breakout Breadth April 13 | Afraid to Trade.com Blog Says:

    […] a broader perspective on Daily Chart Breadth, see our prior update this […]

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