Stock Performance and Market Breadth

To successfully trade stocks, or the major indices, one must consider three things: technical analysis, fundamental analysis and market breadth. 

The focus of this blog is strictly market breadth.

Whether the indices move up, down or sideways, they always go through overbought/oversold cycles. Because of indexing and passive fund management, individual stock moves are strongly correlated with the broader indices. Therefore, being able to determine whether the broader market is overbought or oversold should go a long way in helping you time your trades.

The use and meaning of the gauges, which are updating live during the trading day, is explained in the User Guide.

The chart below shows the SP500 along with market internals in a historical context, and will be updated on a regular basis (whenever possible). As a rule of thumb, 3600 and 1600 are considered overbought/oversold levels. Meaning that when mkt. breadth drops below 1400, it's time to start looking for long entries, and when it climbs above 3600, it's time to tighten stop/loss levels and start looking for short entries.