Nasdaq Composite: Running out of breadth?

Posted May 25th 2007 4:30PM by Michael Panzner
Filed under: Indices, Market Matters, Technical Analysis

Over the past 12 months, swings in the Nasdaq cumulative advance-decline line have loosely tracked the trend in the Nasdaq Composite index itself.

However, since mid-April, this popular measure of market breadth has been something of a laggard, despite the fact that the technology-laden index has been trading near multi-year highs.

While not necessarily a sign of trouble ahead, this sort of divergence often signals that a market lacks the broad participation necessary for a sustainable advance.

Like other recent indicators, it also suggests that the bulls need to tread carefully in the current environment, at least with respect to technology shares.

Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle: An Insider's Guide to Successful Investing in a Changing World.

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