Market Breadth Update Then and Now Jan 21

Jan 21, 2016: 3:45 PM CST

What’s Breadth suggesting about the current market? And how was it extremely helpful in calling the recent top?

Let’s take a look!

First, what we’re seeing is the S&P 500 Weekly Chart with a specific Breadth Indicator.

We’re noting stocks at New 52-Week Highs (Blue), New 52-Week Lows (Red) and the Difference (Lower Panel).

Breadth is helpful to determine whether a Trend in motion is likely to Continue or Reverse.

Namely, when Breadth (stocks making new 52-week highs) consistently INCREASES with price going up, odds favor the continuity of the trend into the near future.

I highlighted two periods of Breadth Strength with Price Strength… and yes stocks continued higher.

However, the three Red Arrows on the New 52-Week High panel also showed negative divergences.

Price continued trading higher while fewer stocks were making fresh 52-Week Highs – locking in a divergence.

Ultimately the market fell sharply in all three examples (mid-2011, mid-2014, and mid-2015).

During those times, many more stocks made fresh new 52-Week Lows as labeled.

At this point we continue to see weakness in Breadth along with weakness in price – not a bearish sign.

Compare the index with this indicator and use the current readings to give us clues to the future.

You can see recent updates from prior days:

January 20: “Targets Hit Instantly Today”

January 19:Daily Pivot Planning Levels

January 15:Weekly Planning (Distribution Arc)

January 7:Distribution Arc Trendlines and Updated Targets

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Corey Rosenbloom, CMT
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Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).

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  • Zonaib

    It is very confusing to think about much at present, as market is pretty mixed, so I would rather want to wait in this then to jump on the train. I am lucky enough to be with OctaFX broker, it is a type of company that we can get serious help from through their daily market news and analysis service, it is very cool and helps a lot with trading, so that is why I love it so very much.

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