Market Breadth
Breadth Operations
There are 12 main ways of manipulating the raw breadth data. The ten operations
are:- Subtraction: Breadth difference is just subtracting one piece of raw breadth
data from another. For example, we could find the net advances by subtract-
ing the advancing issues from the declining issues, that is, (A – D). In a similar
manner, net up volume would be (UV – DV). Some popular breadth indica-
tors that employ breadth differences with respect to advances and declines
are the Advance Decline Line, McClellan Oscillator, Haurlan Index, Plurality
Index, Eakle AD Line, Fugler AD Line, and the NYSE Tick. Popular breadth
indicators that employ differences in new highs and lows are New Highs‐New
Lows and the New High‐New Low Line. Breadth indicators that employ dif-
ferences in volume are the Up Volume‐Down Volume Line and the McClellan
Oscillator‐Volume. It is important to note that the sum of the daily net ad-
vances does not add up to the weekly advances, that is, it is non‐summative.
The reason for not being summative over time is due to the fact that advances
and declines do not take into account the amount of price excursion that a
stock experiences. If the stock is up for the day, this is recorded as an advance
of +1. If a stock closed at $48 on Friday and had three days of advances and
two days of declines, with the stock finishing at $45 on the following Friday,
the total net advance over the five days would be (3 − 2) = 1. But the net
advance for the week would instead be −1, since the stock prices had in fact
declined by ($48 − $45) = $3 for the week. - Division: Breadth ratio is just dividing one piece of raw breadth data by
another. For example, we could divide the advancing issues by the declining
issues, that is, A/D, or the up volume by the down volume, that is, UV/DV.
Some popular breadth indicators that use this mathematical ratio constructed
on advances and declines include the Advance Decline Ratio, Breadth Thrust,
and Hughes Momentum Oscillator. One breadth indicator that employs ratio
calculations on volume is the New High New Low Ratio. - Addition: We could also add pieces of raw breadth data to each other, such as
A + D or UV + DV. One popular breadth indicator that employs the addition
operation is the Changed Volume indicator. - Multiplication: Raw breadth data pieces may also be multiplied by each other,
such as A × D. One popular breadth indicator that employs multiplication is
the Thrust Oscillator: [(A × UV) − (D × DV)]/[(A × UV) + (D × DV)]. - Ratio Adjusting: To account for changing volume of issues at an exchange, we
may divide the results obtained from the other operations by the total number
of issues or total volume. For example, to account for changing volume of is-
sues, we could convert the operator results into a ratio or percentage of the
total number of issues at an exchange, that is, (A − D)/(A + D + U). This would
represent a ratio‐adjusted form of the net advances. A ratio‐adjusted form of
the net up volume would simply be (UV − DV)/T. One popular breadth indi-
cator that employs ratio adjusting is the Schultz indicator, which calculates
the running total of the ratio of all advances over the total number of issues,