Despite what some bearish investors might say, the U.S. stock market’s breadth is IMPROVING right now. Here’s the NYSE’s Advance-Decline Cumulative Line. It is leading the S&P 500 higher.
Bull market tops are accompanied by bearish breadth divergences. (I.e. more stocks fall than rise in the last leg of a bull market.) These divergences last months if not years. Here are the historical cases:
Let’s look at these cases in detail.
There has been no multi-month bearish breadth divergence today. This implies that the current equities bull market is not over and will last AT LEAST a few more months. This thesis is supported by other studies (Study: strong earnings growth is bullish for stocks).
It’s also worth noting that multi-week bearish breadth divergences were common before historical “significant corrections” began. Here’s an example featuring the 2015 “significant correction”.
Here’s an example showing that not all “significant corrections” are preceded by bearish breadth divergences. We cannot use breadth divergences to consistently and accurately predict “significant corrections”.