Yesterday, we highlighted our trading range charts for the S&P 500 and its ten sectors, noting that prices were still oversold. However, the breadth of the market has actually remained positive recently.
The 10-day advance/decline line of the S&P 500 is one breadth indicator we use to measure market internals. It takes the average daily number of advancers minus decliners over the last 10 days. As shown in the bottom chart below, the S&P 500's 10-day A/D line is just about neutral compared to the trading range chart that shows the index in oversold territory. Last week, the A/D line moved into overbought territory even though the price of the market was still well below its 50-day moving average. When breadth gets very overbought, it is a short-term bearish signal. Longer term, however, it's good to see that internals are not nearly as oversold as the current price is.
Subscribe to Bespoke Premium today to view our A/D line charts for the S&P 500 and its ten sectors on a weekly basis.