SP500 Breadth Analysis

An effective way to gauge the breadth of the market is to see the percentage of SP500 stocks which are trading above their 200 day moving average (DMA). As we can see from the chart below a high % of stocks above the 200 DMA indicates bullishness in the market. Further when it falls below 10-12 region and then reclaims 20 it is a sign of further bullishness ahead. And once it sustains above 80 it is  a sign of extreme bullishness.

Observe the periods 2011 and 2019 when it went below 10-12 and then reclaimed 20. Calm periods of bullishness followed. A similar thing has happened in 2020. Markets are suggesting the next few years may be bullish for the broader markets. Currently it is in the low 60s and there is still some time before it conquers the 80 mark. We will keep an eye on this indicator.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: