A/D Line Daily - The most widely used indicator of market breadth and one of the oldest is an advance/decline line. This simple but powerful indicator is constructed by taking a cumulative total of the difference of the number of NYSE issues advancing over those declining in a day. Similar indexes may be constructed for the NASDAQ, Amex, or sub-indexes.

Because the number of issues listed on any of these exchanges has expanded greatly in recent years, a simple plurality of advances over declines will give greater weight to more recent years so a better way to look the numbers is to use a ratio.

The A/D line is a leading indicator and will peak before the major averages because of two reasons. First because interest rates peak before stock prices by about 9 months, then interest rate sensitive stocks tend to peak before the rest of the market and pull down the A/D line. Secondly, some industries peak before others as the economy cools off and these industries and sectors will drag down the A/D line before the rest of the economy.