We are out of a recession, ease in gently

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We are out of a recession, ease in gently


The advance/decline line for the New York Stock Exchange ("NYSE") cumulative indicator takes the total number of stocks that rose during the day and subtracts the number of stocks that fell. So the advance/decline line rises when more stocks go up than down over time.

For the most part, this indicator makes new highs and lows right alongside the S&P 500. But that doesn't always happen...

These divergences often mark a turning point for the overall market. Just look at the chart below to see what I mean...

The stock market and the NYSE advance/decline line both hit new highs in November 2021. But when stocks hit another new high in early 2022, the advance/decline line was well below its high.

That divergence was an early warning sign for investors looking under the hood. It meant that more stocks were going down than up, despite a broad rally in the market. And that meant losses were likely... which is exactly what ended up happening.

Today, we have the opposite situation. Take a look...

The S&P 500 and the advance/decline line bottomed at the same time in October before rallying together into November. And then, in January, they diverged.

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