/wp-content/uploads/2018/03/logo.png 0 0 Stockradar /wp-content/uploads/2018/03/logo.png Stockradar2014-02-21 00:09:592021-06-18 18:01:17Breadth Indicators - Useful or not?
|Be careful when using breadth to measure the health of a market. Whilst the Stockradar (breadth) Index has diverged since 2012 in a compelling manner, it hasn’t helped us make money. It tells us the big caps have taken the index up, rather than the market as a whole. But we still want to be invested in the names moving higher. Negative breadth is a warning sign, at best, and not a viable trading method.The chart above looks at various breadth indicators on the US market to see what is happening in the S&P 500.Most breadth indicators are based on the number of advances versus decliners. Breadth becomes more useful when extremes are reached. Since 2012 all the breadth indicators, including the Stockradar Index, have been diverging with the major indices, as the “big caps” do the heavy lifting. But it is the major declines in breadth, not the small divergences that tip the indices. See the areas highlighted on the chart above. The minor squiggles in divergences are not significant and do not precede significant market falls, but when the breadth indicators fall away sharply, as they did in early 2007, the market collapsed shortly thereafter.|