Bad Breadth

Here’s the thing – breadth is sometimes important and sometimes not.

You can have a negative divergence, where the S&P 500 rallies toward a new high but the amount of stocks rallying with it lags or “does not confirm”. And then you can watch as the divergence resolves to the upside and all the people pointing to it (from the sideline) don’t know what hit them as the price index (the only one that pays) breaks out and away.

There are lots of ways to measure breadth. Some popular ones are:

*new highs vs new lows

*daily or cumulative advance/decline lines

*percentage of stocks above a given moving average

We’ll focus on that last one today.

In my chart, you’ll see S&P 500 price in the top pane, with measures of breadth in the two panes below:


If you were only looking at the percentage of stocks above their 50-day moving average during the recent October rally, the bulls would appear to have quite a bit to hang their hats on. This number hit a high above 80% during the final week of October and start of November.

If you had been looking at the percentage of stocks above their 200-day moving average, however, you’d be looking at a very different picture. With the S&P 500 within 1% of new highs this month, only 50% of its constituent components were above this longer-term trendline. Technicians would look at this metric and note a non-confirmation.

The good news is that the percentage of S&P 500 stocks above the 200-day has improved from the market lows in August and September. The bad news is its nowhere near where it was during the May peak in price, even though we’re almost there again.

In the short-term, breadth during the recent rally has been outstanding, with lots of stocks participating in the run up. On a longer-term time frame, however, it’s looking more like a bounce than a new leg for the bull market.

Of course, I’m over-generalizing here and there are other considerations. For example, the biggest stocks within the S&P 500 are probably more important to watch given their larger weightings. Breadth doesn’t necessarily trump leadership in the order of “what matters” the most.


What's been said:

Discussions found on the web
  1. exact replica watches commented on Sep 18

    … [Trackback]

    […] Here you will find 18061 more Info on that Topic: […]

  2. blazing trader review 2020 commented on Sep 23

    … [Trackback]

    […] Here you can find 87341 additional Information on that Topic: […]

  3. que es el bitcoin evolution commented on Sep 30

    … [Trackback]

    […] Read More here on that Topic: […]

  4. Beretta Guns In Stock commented on Nov 26

    … [Trackback]

    […] Read More on that Topic: […]

  5. dumps pin commented on Nov 27

    … [Trackback]

    […] Information on that Topic: […]

  6. rbc sign in online banking commented on Nov 27

    … [Trackback]

    […] There you can find 87970 more Information on that Topic: […]

  7. togel hk commented on Dec 01

    … [Trackback]

    […] Find More on to that Topic: […]

  8. Tramadol for sale uk commented on Dec 10

    … [Trackback]

    […] Read More on that Topic: […]

  9. DevOps commented on Dec 10

    … [Trackback]

    […] Here you will find 7349 more Info to that Topic: […]

  10. 사설토토 commented on Dec 12

    … [Trackback]

    […] Find More Information here to that Topic: […]

  11. replica rolex commented on Dec 17

    … [Trackback]

    […] Find More Info here on that Topic: […]

  12. Regression Testing commented on Dec 20

    … [Trackback]

    […] Read More on to that Topic: […]

  13. mơ thấy hoa sen commented on Jan 05

    … [Trackback]

    […] Find More to that Topic: […]