The Advance Decline Line is a breadth indicator based on daily net advances made on Nyse, which is the number of advancing stocks less the number of declining stocks. Net advances are positive when advances exceed declines and negative when declines exceed advances. The Advance-/Decline Line rises when there are more net advances and falls when there are more net declines. The Advance-/Decline Line should confirm an advance or decline of the S&P 500. A bullish or bearish divergence in the Advance-/Decline Line compared to the S&P 500 could lead to a trend reversal.
Bullish: If the Advance-/Decline Line is making a new high or is not dropping as low as the market
Bearish: If the market is making a new high which is not confirmed by the Advance-/Decline Line
Divergences between the market and the Advance-/Decline Line should be monitored closely