Market Breadth Analysis

Breadth Ribbon — % Above Moving Averages

What it is: For every stock in the index, we check whether its price sits above or below a given moving average. The result is expressed as a percentage — for example, “72% above MA50” means 72 out of every 100 stocks are trading above their 50-day average. We track four time horizons: EMA 20 (very short-term), MA 50 (medium-term), MA 100 (intermediate), and MA 200 (long-term).

What it tells you: This is the single most important breadth indicator. When a large majority of stocks trade above their moving averages, the rally has broad support. When only a few do, the market is fragile — even if the index itself still looks fine.

How to read it: Readings above 70% signal a healthy bull market with wide participation. Below 30%, most stocks are in downtrends — a clear bearish environment. The Breadth Ribbon stacks all four layers on top of each other: when the ribbon is thick, breadth is strong across all timeframes. When the layers collapse, breadth is eroding from the short end (EMA20) downward, often well before the index itself turns.

McClellan Oscillator

What it is: The McClellan Oscillator takes the daily count of advancing stocks minus declining stocks, then applies two exponential moving averages (19-day and 39-day) to smooth the result. The oscillator is the difference between those two EMAs.

What it tells you: It measures the momentum of market breadth — not just whether breadth is positive, but whether it is accelerating or slowing down. Think of it as the speedometer of market participation.

How to read it: Values above zero mean advancing stocks are outpacing decliners at an increasing rate. Values below zero mean decliners are gaining ground. Extreme readings beyond +100 or −100 often mark turning points: a strong positive thrust can kick off a new rally, while deeply negative readings suggest panic selling that may soon exhaust itself. The most important signal is a zero-line crossover — when the oscillator crosses from negative to positive territory, it frequently confirms a regime change.

Summation Index

What it is: The Summation Index is the running cumulative total of the McClellan Oscillator. Each day’s oscillator value is added to the previous total, creating a smoothed long-term trend line of breadth momentum.

What it tells you: While the McClellan Oscillator captures short-term swings, the Summation Index reveals the bigger picture. A rising Summation Index means breadth momentum has been consistently positive over weeks or months.

How to read it: A rising Summation Index confirms a sustainable uptrend. When it turns down from a high level, the market’s internal momentum is fading even if prices have not yet fallen. A falling Summation Index that begins to flatten and turn up is an early sign that a new bullish phase may be starting.

Zweig Breadth Thrust

What it is: Developed by Martin Zweig, this indicator uses a 10-day EMA of the advance/decline ratio (advances divided by total issues). It is designed to detect rare, explosive breadth surges that mark the beginning of powerful new uptrends.

What it tells you: A Zweig Breadth Thrust is one of the most reliable bullish signals in technical analysis. It fires when the market transitions from deeply oversold breadth to broad-based strength in a very short time — a pattern that historically precedes sustained rallies.

How to read it: The classic trigger occurs when the 10-day EMA rises from below 40% to above 61.5% within 10 trading days. This is exceptionally rare — it has only fired a handful of times in market history — but when it does, the market has been higher 6 and 12 months later in nearly every case. Readings above 61.5% are bullish; readings below 40% are bearish; the zone in between is neutral.

Advance/Decline Line

What it is: Each day, we count the number of stocks that closed higher (advances) and the number that closed lower (declines). The Advance/Decline Line is a running cumulative total: today’s A/D Line = yesterday’s A/D Line + (advances − declines).

What it tells you: The A/D Line is one of the oldest and most trusted breadth indicators. It tells you whether the “average stock” is moving in the same direction as the index. If the index is making new highs but the A/D Line is not, many stocks are being left behind.

How to read it: In a healthy market, the A/D Line rises alongside the index. The most important signal is divergence: when the index reaches a new high but the A/D Line fails to confirm, it warns that market leadership is narrowing — a classic precursor to corrections. Conversely, if the A/D Line makes a new high while the index has not yet followed, it suggests underlying strength that may soon push prices higher.

Point & Figure Bullish Percentage

What it is: Point & Figure (P&F) charting is a method that filters out minor price noise and focuses only on significant reversals. For each stock, we determine whether its P&F chart is currently on a “buy signal” (the most recent column of X’s exceeds a prior column). The Bullish Percentage is the share of all index members that are on a P&F buy signal.

What it tells you: Unlike moving-average-based indicators that can whipsaw in choppy markets, P&F signals change only on meaningful price moves. This makes the Bullish Percentage a steadier, less noisy measure of how many stocks are in genuine uptrends.

How to read it: Readings above 70% indicate broad bullish conviction. Below 30%, most stocks have turned to sell signals — typically seen near market bottoms. The direction of change matters as much as the level: a P&F Bullish Percentage rising from 30% toward 50% often signals that a recovery is gaining traction, while a decline from 70% warns of deteriorating internals.

New 52-Week Highs & Lows

What it is: Each day, we count how many stocks have reached a new 52-week high and how many have fallen to a new 52-week low. The NH/NL Ratio expresses this as new highs divided by new lows.

What it tells you: New highs and lows are a direct measure of trend strength at the individual stock level. A market where many stocks are hitting fresh highs and very few are making new lows is in excellent health.

How to read it: An NH/NL Ratio well above 1.0 (for example 5:1 or higher) indicates strong bullish breadth. A ratio near 1.0 means the market is split, and a ratio below 1.0 means new lows are outpacing new highs — a sign of broad weakness. One of the most reliable warning signals in all of technical analysis is when the index makes a new high, but the number of individual stocks making new highs is decreasing. This divergence often leads corrections by weeks.

Volatility Breadth

What it is: Volatility breadth tracks what percentage of stocks are experiencing rising short-term volatility (measured via their 14-day Average True Range). We also track the share of stocks in a “high volatility regime” — those whose current ATR is significantly above their own 60-day average.

What it tells you: Volatility tends to spike during sell-offs and compress during calm uptrends. When a large percentage of stocks show rising volatility at the same time, the market is under stress — even if the headline index has not moved much yet.

How to read it: Low readings (“% Rising Volatility” below 40%) are typical in healthy bull markets where stocks grind higher with low turbulence. Readings above 60–70% indicate widespread stress. Extremely high readings often coincide with panic selling and can mark short-term bottoms as fear reaches its peak.

Momentum Breadth

What it is: For each stock, we calculate the Rate of Change (ROC) over 20 trading days and 5 trading days. Momentum breadth is the percentage of stocks with a positive rate of change — in other words, stocks that are higher now than they were 20 (or 5) days ago.

What it tells you: While % above moving averages tells you about trend positioning, momentum breadth tells you about recent direction. A stock can sit above its MA50 but still have negative 20-day momentum if it has been drifting lower recently. This makes momentum breadth a faster, more responsive signal.

How to read it: When more than 70% of stocks show positive 20-day momentum, the market has strong underlying thrust. Below 30%, most stocks are losing ground. The 5-day version reacts even faster and is useful for spotting short-term shifts. Watch for divergence between the 20-day and 5-day readings: if 5-day momentum is recovering while 20-day remains weak, a turn may be forming.

Hindenburg Omen

What it is: The Hindenburg Omen is a rare technical warning signal that fires when the market becomes deeply split — a large number of stocks are simultaneously making new 52-week highs and new 52-week lows. Specifically, both new highs and new lows must exceed 2.5% of total issues, the McClellan Oscillator must be negative, and the market must be in an overall uptrend.

What it tells you: A healthy market moves together. When many stocks hit new highs and many hit new lows on the same day, the market is internally conflicted. This kind of split historically precedes meaningful corrections, though a single signal alone is not reliable.

How to read it: A single Hindenburg Omen is easy to dismiss — it has a hit rate of roughly 25%. The real danger arises when signals cluster: three or more signals within 30 days significantly raise the probability of a 5–15% correction in the following weeks. Our chart shows the cluster count to help you assess whether the signal is isolated noise or a genuine warning pattern.

Regime Coloring (Composite Breadth Score)

What it is: The regime coloring on the ETF candlestick chart is driven by a composite score that blends the key breadth indicators above into a single number from 0 to 100. The primary input is the average of % above EMA20, MA50, MA100, and MA200.

What it tells you: Instead of checking each breadth indicator individually, the regime score gives you an instant visual read of overall market health. The candles are colored accordingly:

• Bull Trend — Score ≥ 65. Broad, healthy participation across timeframes.
• Accumulation — Score 50–65. Improving breadth, early recovery phase.
• Neutral — Score 40–50. Mixed signals, transition zone.
• Bear Trend — Score < 40. Widespread weakness, risk-off environment.

How to read it: Use the regime color as your starting point: green candles mean the broad market supports the rally, red candles mean internals are deteriorating. Then drill into individual indicators to understand why the regime is what it is and whether it is likely to change.