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Market breadth

Measures of how many individual stocks are participating in a market move, as opposed to what the headline index is doing.

A capitalisation-weighted index can rise while most of its members fall, if the largest few carry it. Breadth measures look underneath the index: how many stocks advanced, how many made new highs, how many sit above their moving averages.

Narrow breadth during an advance is a classic warning that the move rests on a handful of names, and broad participation on a decline suggests genuine selling rather than rotation. Tools include the advance-decline-line, new-highs-new-lows, percent-above-moving-average and the mcclellan-oscillator.

Breadth divergences are early and can persist for a long time before anything happens, and there are famous examples of narrow markets continuing for a year or more. Use breadth to describe the quality of a move and to size risk, not to time entries.

Related: advance-decline-line, new-highs-new-lows, mcclellan-oscillator, percent-above-moving-average, breadth-thrust

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

A stochastic oscillator under a price chartA price line above a lower panel with a fast and a slow curve swinging between a line at 80 and a line at 20, and the point where the fast curve turns up through the slow one circled.PRICESTOCHASTIC (14, 3)80overbought20oversold%K%D%K crosses above %D
The stochastic oscillator. The stochastic shows where each close sits inside the recent high-to-low range, on a scale of 0 to 100. Readings above 80 mean closes are hugging the top of that range and below 20 the bottom; the circle marks the fast line turning up through the slow one.

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