Market Breadth¶
Market breadth measures the degree of participation behind a market move — how many individual stocks are advancing versus declining, making new highs versus new lows, and trading on up-volume versus down-volume. A cap-weighted index can be pulled higher by a handful of mega-caps while the average stock deteriorates; breadth looks under the hood at the full constituent list. Rising index plus rising breadth confirms a trend; rising index plus falling breadth is a divergence — the classic late-cycle warning sign.
HOW IT WORKS¶
Breadth is calculated from daily exchange statistics and expressed through several core indicators:
- Advance/Decline Line — a running cumulative total of advancing minus declining issues. The NYSE A/D line is the oldest breadth series in continuous use.
- High-Low Index — smooths new 52-week highs and lows as a 10-day ratio: NH ÷ (NH + NL) × 100.
- Arms Index (TRIN) — combines issue and volume ratios: (Advancing ÷ Declining issues) ÷ (Advancing ÷ Declining volume). Readings above 1.0 indicate declining volume dominates; above 2.0 signals capitulation.
- Percent Above Moving Averages — the share of S&P 500 stocks trading above their 50-day or 200-day average. Above 80% is overbought; below 20% is washed out.
- McClellan Oscillator / Summation Index — a 19-day minus 39-day EMA of net advances, and its cumulative form, used to track breadth momentum and trend.
Breadth divergences are a leading rather than a coincident signal — the A/D line diverged for over a year before the 2007 market peak. NYSE breadth is also contaminated by bond funds and preferred shares; purists use common-stock-only A/D data for cleaner readings.
IN TAPEBOARD¶
Tapeboard surfaces breadth data alongside price charts so divergences are visible at a glance rather than requiring a separate platform. Key workflows include:
- Breadth dashboard — monitor the NYSE and S&P 500 A/D lines, percent-above-50-day, and TRIN on a single screen updated in real time during market hours.
- Thrust alerts — set a scan to fire when the percent-above-50-day crosses from below 20% to above 55% within ten sessions, one of the highest-probability forward-return setups in the historical record.
- Divergence overlay — plot the cumulative A/D line or percent-above-200-day directly beneath the S&P 500 price panel to spot non-confirmations at index highs before they resolve.
- Intraday breadth — TRIN and the TICK index stream in the terminal for real-time confirmation or fading of index moves during the session.