There’s been some complaining recently about the breadth of the market. Quite simply it’s been horrible, I saw one tweet that said “I have no idea what is holding up this market”. Big caps have been holding up this market.
The ten-day moving average of the advance-decline line for the NYSE, NASDAQ, AMEX is also negative with the three major indices printing near highs.
This divergence, for the most part, is due to the small caps underperforming. Sometimes this divergence will impact the market in a negative way sometimes it won’t.
There are two things you should know about negative breadth divergences;
- They don’t work as well or as timely as positive breadth divergences, and this goes for every indicator out there.
- You have to keep an open mind that perhaps stocks will catch up to the indices and negate the negative divergences.
Only time will tell.