“I have conducted several studies asking, ‘If something changes, what and why did the change occur?’ I asked my research students to go back to 1929 and look at every time the Dow made a new high and the advance-decline index failed to confirm. There were roughly 15 times. There are very few absolutes on Wall Street. This is as close as it gets. Every one of those 15 times preceded a measurable sell off.
“When the Dow is making new highs, but fewer and fewer stocks are doing so, we have a recipe for disaster. The stock market can only continue to rally for just so long with stocks getting more and more narrow. So if you were aware of this sequence, you would have been out of the market prior to the 1987 top, the 1990 top, the 1998 severe sell off, and the top in 2000. I started to warn in late 1999 because breadth continued to get more and more narrow. And that continued for a long time.
“So there were 15 times going back to 1929 when a decline in breadth preceded a major sell off. You want to be aware of this, because its track record is incredibly important.” [Ralph Bloch, 8/20/2004]