By Lawrence G. McMillan
The market has shown impressive strength recently, with $SPX closing above the key 5800 level. That move alone adds to the bullish tone, but the real question now is: Could this be the start of a push to new all-time highs?
There’s one indicator that might offer a clue — Cumulative Volume Breadth (CVB).
CVB measures the difference between advancing and declining volume each day, and then keeps a running total. Historically, this indicator has occasionally made a new all-time high before $SPX does — and when it has, $SPX has always followed. We previously explored this phenomenon in an October 2020 article titled The Cumulative Advance-Decline Volume Line, where we highlighted eleven such signals dating back to 2000. Every time, $SPX eventually caught up.
That said, CVB hasn’t made a new high yet, but it’s getting close. If it does break out to a new all-time high, it would be a powerful bullish signal, historically speaking. While there’s no guarantee the pattern will repeat, it’s certainly worth monitoring.
We’re keeping a close eye on it, and we’ll continue tracking the status of this indicator in The Option Strategist Newsletter. If you’re interested in following this potential setup — and staying ahead of the curve on key technical signals — we encourage you to subscribe.
Sometimes the market gives advance warning. CVB might be doing just that.
© 2023 The Option Strategist | McMillan Analysis Corporation