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Market Breadth Composite Rank Update

Dean Christians
2021-06-11

The S&P 500 Index closed at a new all-time high on Thursday. Whenever an Index registers a new high, I always like to assess the market's internal condition to see if the troops are participating.

Let's review how the new all-time high compares to history as measured by a market breadth composite.

MARKET BREADTH COMPOSITE COMPONENTS

  • Percentage of issues above the 10-day moving average
  • Percentage of issues above the 50-day moving average
  • Percentage of issues above the 200-day moving average
  • Percentage Spread Between 21-Day Highs and Lows
  • Percentage Spread Between 63-Day Highs and Lows
  • Percentage Spread Between 252-Day Highs and Lows

The individual component values are summed and divided by six to arrive at a single composite value. Composite values can turn negative during corrections and bear markets as new lows overwhelm new highs in the spread calculation.

MARKET BREADTH COMPOSITE STUDY

I first identified every single all-time closing high in the S&P 500 Index since 1928. According to my calculation, there are 1,302 instances. I then ranked each breadth composite value on the day of the all-time closing high. Rankings range from 100 (strongest) to 0 (weakest). By ranking each all-time high, I can now make an apples-to-apple comparison throughout history. 

I conducted the same study for the S&P 1500 with data starting in 1963.

MARKET BREADTH COMPOSITE TABLE

The S&P 500 and 1500 Index composite breadth rankings are weak, especially compared to the stellar levels in March and April. Given the month-long consolidation, it's not surprising to see underwhelming numbers. As is the case with most consolidations, breadth typically deteriorates as price-based indicators catch up to current stock price levels. I usually give the market the benefit of the doubt in a situation like this as other alarm bells are not ringing.

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