Market Breadth
- Combination: Some breadth indicators are more complex in design, requiring
a combination of breadth operations. For example, the Arms Index is based on
a ratio of a ratio mathematical construct, that is, (A/D)/(UV/DV). The Thrust
Oscillator as seen in item (4) above, is a perfect example of more complex
operations. - Absolute Revaluation: There are some breadth indicators that require only
positive values from breadth operations, also termed absolute values. For
example, the absolute value of (10 − 20) is 10, and not −10. One popular
breadth indicator that uses absolute values is the Plurality Index, which it uses
the sum of the absolute differences between the advances and declines over the
last 25 days, that is, ∑ |A − D| over the last 25 days.
Market‐Breadth fields
Market breadth data may be calculated for:■ (^) Issues within an exchange (e.g., NYSE, NASDAQ, TSE, AMEX, CDNX, LSE,
KLSE, ASE, BSE, etc.)
■ (^) Issues within an index (e.g., S&P 400, S&P 500, S&P 600, Russell 2000, etc.)
■ (^) Issues within an ETF (e.g., Select Sector SPDRs for Consumer Staples, Indus-
trials, Financials, Energy, Materials, Utilities, etc.)
Summarizing, we may therefore briefly categorize the breadth operations and
data fields as:
■ (^) Advance Decline Differences (A − D), Ratios (A/D), Cumulative, and Complex
Operations
■ (^) New High New Low Differences (H − L), Ratios (H/L) and (H/(H+L)), Cumu-
lative, and Complex Operations
■ (^) Volume Differences (UV − DV), Ratios (UV/DV), Cumulative, and Complex
Operations
See Figure 22.2 for a summary of all market fields, breadth‐data fields, breadth
operators, and indicators.
22.3 Market‐Breadth Indicators in Action
advance decline indicators
It is important to note that the value of the Advance Decline Line (AD Line) indi-
cator depends on when the calculation begins. Different start dates will result in
different running totals. This does not affect the shape or direction and hence this
allows the practitioner to use:■ (^) Chart pattern analysis
■ (^) Trendlines and channels
■ (^) Divergence
■ (^) Historical extremes