Divergence between advances and declines in a breadth of the market indicator and the Dow Jones Industrial Average may signal a reversing trend in the market.

Question

Quizplus · Accepted Answer

Advances and declines usually move in concert with the popular market averages, but may move in the opposite direction at a market peak or bottom. One of the possible signals for the end of a bull market is when the Dow Jones Industrial Average is moving up, but the number of daily declines consistently exceeds the number of daily advances on the New York Stock Exchange. This indicates that conservative investors are investing in blue-chip stocks, but that there is a lack of broad-based confidence in the market.

Divergence Between Advances and Declines in a Breadth of the Market