Price-Breadth Divergence
Index at highs but internals deteriorating
A divergence occurs when the S&P 500 makes new highs but the advance-decline line or percentage of stocks above key moving averages does not confirm. This non-confirmation has preceded significant tops in 2000, 2007, 2015, and 2021.
What history says
Editorial commentary written by ALAN analysts. Figures cited below are analyst-authored context — they are not derived from the chart above and may reflect different windows or sources.
A divergence can persist for months before resolving. It raises the probability of a correction but does not predict timing. Use it to tighten risk management, not to exit positions.
The NYSE advance-decline line (cumulative advances minus declines) should confirm new index highs. When it diverges, the rally is built on a narrow foundation.
Some breadth divergences resolve with a rotation (mega-cap pause, mid-cap catch-up) rather than a broad decline. The key differentiator is whether the divergence occurs with deteriorating credit conditions.
Treat a price-breadth divergence as the moment to do the maintenance you would want finished before any correction — refresh cash reserves for near-term spending and confirm position sizes still match your written targets — rather than as a cue to exit equities.