Commodity advance-decline from delivery months

Session net and the running line

A session advance-decline net is the number of advancing closes minus the number of declining closes. In the archive workflow, 235 advances and 356 declines equal a net of -121.

The cumulative breadth line is a running total of those session nets and may start at any seed. A seed of 1,000 plus a session net of -121 equals 879, and adding a following net of +205 equals 1,084.

The running total is charted against a daily price-index close. Joint higher or lower trends count as confirmation. Opposite trends count as non-confirmation of market breadth.

Equal-weight closes and divergence

Because a close up a small increment and a close up several points each count as one advance, the tally is an equal-weight close. A rising breadth line with a lagging index can mark weak upside. A falling breadth line with a slower-falling index can mark residual strength.

Divergence is the case where the index and the breadth line disagree on a new high or a new low. The archive uses that disagreement as a warning that the price move may not be widely shared.

The equity illustration

In the illustrated equity episode, a July recovery high in the industrial average that the breadth line did not confirm was followed by a 180-point decline.

A later June-to-August drop in which the average held its May low while the line broke its May low was treated as a strength non-confirmation before a rally to new recovery highs.

Delivery-month votes and the basket-sum

A commodity analogue is formed by summing, each day, up-closing minus down-closing delivery months across all 21 members of the commodity futures price-index basket, then accumulating that daily net and charting it against the index. That daily market reading is the basket-sum of the per-commodity nets.

Per-commodity nets treat every delivery month as one vote. Seven corn months all closing higher contribute +7. Oats with two months higher and three lower contribute -1.

The 1988 commodity illustration

In the 1988 commodity illustration, May joint new yearly highs confirmed a broad rally. A late-June stall in the breadth line while the index edged higher was a minor divergence. July produced a string of non-confirmations, then a late-July confirmed downtrend of lower highs and lower lows.

Later autumn divergences included a breadth return to yearly highs the index could not match, an unconfirmed November index uptick, and unconfirmed new index lows in mid-November.

After that mid-November non-confirmation, the breadth line made new yearly highs while the index only surpassed August-September resistance. The archive frames the long-horizon split as negative, and the near-term joint advance as the reading to respect.