Pete Glass recently posted a good analysis at Crystal Ball Forum--an excellent subscription site with both a generally bullish and a generally bearish forum and lots of good ideas on both forums*-- on the NYSE daily advance/decline line (A/D) together with a daily NYSE A/D chart from way back in the 1920's, which chart was attributed to Peter Eliades.
The stand-alone daily A/D "line" or ratio is very useful for short term market breadth measurements as we all know, but in my opinion cumulative long term A/D is, and has always been, misunderstood by analysts.
For example, why did NYSE A/D make a bottom between 1932 and 1942? Why did it peak in the late 1950's? Why did it make a bottom from 1974 to 2001? Why has it been flying since then?
I think the answer to all these questions (and the chart) is that cumulative daily NYSE A/D measures long term new dynamic growth vehicles (corporations). In other words it measures the vastly increased number of newly formed companies 5-10 years before the second bottoms which have grown fast enough to make it to the NYSE and that are still growing.
We forget, if we knew, the tremendous increase of new companies in the 1930's and early 40's as interest rates were falling. But many of us have experienced that similar dynamic growth era in new and vibrant corporations from 1974 to recent years.
In turn, the peak in A/D in the late 1950's was a final growth maturation peak of all those mostly manufacturing corporations of the "old economy", even though the stock market continued to chug on up into the 1966/69/72 highs before collapsing as rising interest rates finally pulled the plug on the weakening old economy.
My impression and belief is that cumulative NYSE A/D is currently telling us that we are in the early stages of a growth explosion in companies which are not yet old enough to have become flabby or to be killed by interest rate rises. When flabbiness ensues and rates get "too high", in another decade or so (= +/-), the A/D will make another long term top well before the market does.
Given the current era's corporate conversion into "virtual" offshore labor and manufacturing companies with marketing and finance still on-shore US, my guess is that the A/D top will come only when the "last" US company to do so has off-shored everything, and it becomes evident that that is no longer the right thing to do. (Read, via Google or Vivisimo, some of L-V Gave's descriptions of the virtual corporation phenomenon for perspective.) Meanwhile despite minor pullbacks, or even if there is a 15% bear market pullback, the US stock market has staying power based on the existence of so many relatively new dynamic growers.