The NYSE Advance/Decline Diffusion Index crossed above 60 and has held for the past two weeks — this is the first overbought reading since October 2024.
Here’s the chart:
Let's break down what the chart shows:
The blue line in the top panel shows the S&P 500 index.
The black line in the lower panel shows the NYSE A/D Diffusion Index.
Each vertical gray line highlights where the NYSE A/D Diffusion Index crosses above 60.
The Takeaway: Overbought ≠ Exhaustion.
It means demand is broad.
This is one of my favorite tools for spotting real strength under the hood. Built by Ned Davis Research, the NYSE A/D Diffusion Index tracks how many stocks are moving higher each week… and when it breaks above 60, things tend to get interesting.
It tells us most stocks are trending higher, not just a handful of mega-caps.
This kind of participation fuels sustainable trends. It’s the market’s way of saying: this move is broad, not narrow.
And history backs that up.
Since 1981, there have been 60 thrusts where the index crossed above 60. One year later, the S&P 500 was higher 85.7% of the time, with an average gain of 12.2%.
That’s not a warning sign.
That’s strength!
These thrusts tend to show up near major turning points or early in powerful bull markets, like 2003, 2009, and 2020.
When participation expands this quickly, it often marks the start of something meaningful.
It’s the kind of signal that shows up when a rally is just getting going, not running out of steam.
When more stocks start to join in, that’s not something to fade.
Overbought in this case doesn’t mean stretched. It means buyers are in control.
And when that happens, history says the path of least resistance is higher.
If this is what “overbought” looks like, would you really want to bet against it?
Grant Hawkridge | Chief Aussie Operator, All Star Charts
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