Chart 6.4 illustrates the behavior of the advance-decline line and its 21-day rate of change momentum oscillator during periods in which market breadth was essentially favorable in relation to the movement of the Standard & Poor’s 500 Index. Favorable internal-external market relationships suggested improving market conditions and a bull market that ensued.
Chart 6.5 illustrates the reverse, a bull market in both price and breadth that ultimately failed, first in breadth readings and then in price movement. This is a frequent pattern as bull markets come to an end. Let’s examine the chart.