Stocks Get an Important Green Light
Though exceptions occur principles are incredibly reliable guides. Just as a prospering middle class is among the sturdiest principles for a healthy national economy, so is an increasing advance/decline (‘A/D’) line for a bull market in stocks. The arithmetic is simple: when more stocks appreciate than depreciate the line rises, and vice versa. The market breadth of a rising A/D line indicates enduring strength, but when the averages advance as the A/D line declines, the concentration of returns gives ample warning of underlying decay to those paying attention, and prices generally follow. Few market developments provide greater stimulus to the deployment of capital for institutional investors than an A/D line which turns from negative to positive, save, perhaps, the S&P 500 vs. 200 DMA. Often these powerful indicators trigger simultaneously, and recently have.¹
Though consumers, responsible for two-thirds of U.S. economic production, are now funding spending primarily with debt, and consumer debt is at all-time (nominal) highs, and default rates are rising, it is simultaneously true that technology is filling (formerly) human jobs with robots, increasing corporate profitability, and minting new millionaire investors so efficiently it’s difficult to ascertain when a recession may arrive; in the meantime, stocks have momentum, are attracting capital, and are knocking on the door of “All Time Highs”. It may be a good time to remember Newton’s First Law!
The April-May sell-off associated with Trump’s tariff threats was heavily concentrated in large tech names with lofty valuations and did not undermine the broad strength of the market.
Today the ‘A/D’ line, a strong indicator for the direction of stocks, is approaching an all-time high.²
While the ‘A/D’ line is flashing an encouraging sign today for the durability of the ongoing bull market, it is but one of many indicators and not offering investors certainty.
Stay vigilant. Lean don’t jump. Have an exit plan in place and follow it. Practice position-sizing. As always, this is a great time to buy capital-efficient, industry-dominating businesses when selling for a fair price, and to compound dividends over time.
Think about it, Shaun.
1,2 Stansberry Research, The Stansberry Digest, “A Simple Bauge of Market Health is Flashing Green” June 26, 2025
The opinions voiced in this material are general and are not intended to provide specific recommendations.