There are several classes of indicators I routinely follow to runway marketplace forcefulness too weakness. These include measures of sentiment, breadth, momentum, volatility, correlation, too marketplace participation (behavior of large marketplace participants). Among these measures, in that location is oftentimes considerable statistical overlap. Because they are correlated, they are non genuinely touchstone unlike things. In an upcoming post, I volition address this lawsuit past times discussing purified indicators–ones inwards which overlap has been removed, too thus that nosotros are looking at purer forms of sentiment, breadth, etc. For an inspiring representative of purification, banking concern jibe out this newspaper from David Aronson highlighting his structure of a purified VIX measure.
Above nosotros come across iii electrical current measures of marketplace breadth. The hand nautical chart tracks the amount of 5, 20, too 100-day novel highs minus novel lows with all shares inwards the Standard too Poor’s 500 Index. The middle nautical chart looks at the average of the percentages of stocks inwards that index that are trading inwards a higher house their 3, 5, 10, too 20-day moving averages. The raw information for both these measures come upwards from Index Indicators. The bottom nautical chart displays the amount of stocks across all exchanges that are making fresh three-month novel highs minus novel lows.
Note that the iii measures country a like story: Peaks inwards breadth tend to precede cost peaks for intermediate-term marketplace cycles. Until recently, successive breadth peaks were occurring at fresh cost highs for the wide market. During this almost recent cycle, we’ve seen lower peaks inwards breadth too a failure of breadth forcefulness to generate fresh cost highs. All of this is suggestive of a weakening/topping market, equally recent buyers convey non been able to sustain the marketplace uptrend.
Further Reading: Tracking Breadth Across Cycles