What Is the Advance/Decline Ratio? Read Market Strength & Weakness

What is the advance/decline ratio? And why does it matter?

Here’s why: the stock market can be deceptive.

Some days the S&P 500 surges and headlines celebrate a “strong” market — yet your portfolio barely moves. Other days the index falls even though most of your stocks are up. What’s going on?

Much of this disconnect comes from one fact most investors forget:

The S&P 500 is dominated by a handful of mega-companies.

As of November 2025, the “Magnificent Seven”—Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla—made up about 35% of the entire index. Because the S&P is cap-weighted, large companies carry enormous influence.

That means:

The index can rise even when most companies are falling
The index can fall even if the majority of stocks are up
Market “health” can be very different than the surface-level headlines

Like a calm ocean surface that hides underlying currents, this can sometimes mask underlying weaknesses in the economy.

This is why professional investors look beyond the index level…

and turn instead to market breadth.

The Advance/Decline Ratio is one of the most widely used market breadth indicators because it tells you whether the overall market is strong, weak, or masking internal fragility. Today, we’ll break down exactly what it means, how to interpret it, and what it may suggest about the current market environment.

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What Is the Advance/Decline Ratio?

The Advance/Decline Ratio measures how many stocks are rising vs. falling within an index (such as the S&P 500) over a certain time period.

The formula:

A/D Ratio = Number of Advancing Stocks ÷ Number of Declining Stocks

How to interpret it:

✔ A/D Ratio above 1:
More stocks are rising than falling → broad market strength

✔ A/D Ratio below 1:
More stocks are falling than rising → broad market weakness

✔ A/D Ratio near 1:
Mixed or neutral market conditions

This is useful because it shows true market participation, not just index movement.

When the S&P rises because 7 tech giants are surging—but 400+ stocks are declining—investors should recognize the market’s underlying weakness.

When the S&P dips but most stocks are rising, that could be strength disguised as weakness.

This is the power of understanding market breadth.

Why Market Breadth Matters More Than the Index

Market breadth helps reveal the “health” of the entire market:

Strong breadth → Many sectors are participating → Less evidence of an extended downturn taking hold
Weak breadth → Only a few leaders are propping up the index → More evidence for a fragile environment

Breadth can’t predict the future by itself — but as part of a comprehensive strategy of analysis, it helps investors interpret what is happening in the present (and help plan for the future).

Real Example: Current Market Breadth

As of mid November 2025, the monthly Advance/Decline Ratio of the S&P 500 was:

0.95

(This calculation is based on aggregated monthly advancers and decliners within the S&P 500.)

A ratio of 0.95 means that slightly more stocks declined than advanced — not a major imbalance, but a sign of mild weakness in market breadth.

But as always, markets are never one-sided. Other forward-looking indicators (both fundamental and technical) need to be considered.

The A/D Ratio tells us a fair number of stocks have been falling recently — and as part of the greater context (in my opinion), I believe this aligns with several indicators that show a choppy year for 2026.

How the Advance/Decline Ratio Helps Investors

Here are some of the common questions the A/D Ratio helps answer:

✔ Is the market rally “real”?

If breadth is strong, the answer is usually yes.
If only a handful of stocks are rising, the rally is fragile.

✔ Is the market showing hidden weakness?

If breadth drops below 1.0 consistently, watch out.
That could suggest large investors are reducing risk before the headlines notice.

✔ Are investors broadly confident or quietly backing away?

Rising breadth signals broad confidence
Falling breadth signals widespread caution

✔ Should you trust the headline numbers?

Not always.
Breadth tells you whether the market’s strength is widespread or hollow.

How Beginner Investors Use It

If you’re wondering:

“Why does my portfolio lag the S&P 500?”
“Why does the market feel weak even when the index is up?”
“How can I tell if the market is healthy?”

The A/D Ratio answers all three.

It gives you a clear picture of the stock market’s true strength—the kind of insight most everyday investors never get.

How Technical Analysts Use It

In technical analysis, the A/D Ratio is a key market breadth indicator used to:

validate market uptrends
identify divergences
measure internal strength
forecast potential shifts

Professionals rarely use it in isolation, but often use it as part of the bigger picture.

Key Takeaway

The Advance/Decline Ratio is a simple but powerful way to look beneath the surface of the market. It helps you understand whether the market’s movement is being carried by:

a few mega-stocks
or
broad, healthy participation from companies across the index.

As of this article’s update in November 2025, breadth is weak, while momentum remains strong. Risk levels are above average, in my opinion.

Use the A/D Ratio as a tool…not a perfect one-size-fits-all predictor.

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