Market Breadth

1 Apr

This market internal indicator, the market breadth (aka the breadth ratio) is a figure composed of the ratio of volume flowing into up stocks compared to the amount of volume flowing into down stocks. A breadth ratio relative to 1 is generated.

Example: A day with 10M shares of advancing volume and 5M shares of declining volume results in a breadth of 2:1 Positive, 2x as many shares are rising than falling.

How to Use Market Breadth

We look to market breadth as a relationship of where it’s been. If we open at 2:1 + and an hour into the day we are at 4:1, but the market hasn’t yet moved, we look to go long in anticipation that the market will play catchup.

Generally, the Breadth is more important than the advance decline line because it takes into account the volume of advancing to declining shares. A breadth number is calculated separately for the NYSE and the NASDAQ.

Market Breadth

 

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