John Hussman on Learning From Divergences

by: John Hussman

Excerpt from fund manager John Hussman’s weekly essay on the US market:

Though the general character of market action in recent weeks has not been too bad, the NYSE advance-decline line (a running tally of daily advancing issues on the NYSE minus declining issues) has appeared out-of-place in the context of other measures. To get at what's happening internally, it's instructive to compare the overall NYSE advance-decline line with the advance-decline line of the 30 stocks in the Dow Jones Industrial Average, as well as the largest 30 stocks in the S&P 500 Index. Thanks to Bill Hester for the following chart:

Notice the divergence that's been developing since last November. For the past several months, we've been seeing fairly persistent “distribution