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”
Follow along with members of the Afraid to Trade Premium Membership for real-time updates and additional trade planning.
Corey Rosenbloom, CMT
Afraid to Trade.com
Follow Corey on Twitter: http://twitter.com/afraidtotrade