Advance-Decline Line, Definition
The advance-decline line is an indicator used to measure the breadth of a stock market advance or decline. The indicator uses the number of advancing stocks and compares that figure with the number of declining stocks. If advances outnumber declines the net total is added to the previous cumulative total, and if declines outnumber advances that net difference is subtracted from the previous cumulative total.
The advance decline line is compared to a major index such as the S&P 500 or the Dow 30. When the advance-decline line diverges from the stock market index, this is interpreted as a possible overbought/oversold signal.
See also: Advancing Declining Issues