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Market Breadth

“If I could impress on you one fact, it would be that at least 75 percent of the risk in any stock is associated with the market and sector. If the overall market is not supporting higher prices, very few stocks you own, if any, will do well.”
Thomas J. Dorsey – Point and Figure Charting

Being able to identify the four Stages visually on individual stock charts is a crucial skill when using the Stage Analysis method. However, the major stock market index charts, such as the S&P 500, the Dow Jones Industrial Average, and the Nasdaq 100, are all just averages of the stocks within them, and are also distorted by the weighting of stocks.

For example, currently the top 10 stocks in the Nasdaq 100, make up 54% of the weighting. So over half of the Nasdaq 100s price action is determined by just 10% of the stocks. Therefore, you could have a scenario where 90% of stocks in the index are in Stage 4 declines, but the index chart could still look reasonably healthy in Stage 2, as the top 10 stocks are still in Stage 2 advances and holding the index up.

This is where market breadth indicators come into play. As they give you an unbiased look at what’s really going on under the surface of the stock market, and so can help you to determine the actual Stage that the market index is in.

There are many different data sources that you can use to get market breadth information, and each have their own strengths and weaknesses. But in the Stage Analysis method, no market breadth information is used in isolation. Instead, we use what is known as the Weight of Evidence approach, where all of the different market breadth information is combined to determine the overall strategy that should be used, and so can help you to determine whether you should be using a more cautious strategy or a more aggressive one.

Stan Weinstein was famous for using over 50 different indicators to determine the Weight of Evidence. But retail investors shouldn’t be put off, as you can achieve a similar effect by using a much smaller, core set of market breadth indicators, to create your own Weight of Evidence.

Stage Analysis Members Video – 26 November 2023 (1hr 19mins)

Stage Analysis members weekend video discussing the Major US Stock Market Indexes, Industry Groups Relative Strength (RS) Rankings, IBD Industry Group Bell Curve – Bullish Percent, the key Market Breadth Charts to determine the Weight of Evidence, Significant Weekly Bars and the US watchlist stocks in detail on multiple timeframes.
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IBD Industry Groups Bell Curve – Bullish Percent

The IBD Industry Groups Bell Curve increased by +1.88% this week to finish at 41.88% overall. The amount of groups in Stage 4 (Weak) decreased by 5 (-2.5%), and the amount of groups in Stage 2 (Strong) increased by 8 (+4%), while the amount groups in Stage 1 or Stage 3 (Neutral) decreased by 3 (-1.5%).
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IBD Industry Groups Bell Curve – Bullish Percent

The IBD Industry Groups Bell Curve increased by +6.43% this week to finish at 40.00% overall. The amount of groups in Stage 4 (Weak) decreased by 34 (-17%), and the amount of groups in Stage 2 (Strong) increased by 10 (+5%), while the amount groups in Stage 1 or Stage 3 (Neutral) increased by 24 (+12%).
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Nasdaq 100 Approaching 2023 Highs and the US Stocks Watchlist – 14 November 2023

The US stock market exploded higher today, as Small Caps surged over +5%, with the Russell 2000 moving back to within -1% of its 200 day MA. But, the small caps weren't the only strong movers, as the rest of the major indexes all had strong follow through days, and the Nasdaq 100 (shown above) has moved within -1% of its 2023 highs (set on the 19th July) and so is approaching the top of its Stage 3 range...
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Stage Analysis Members Video – 12 November 2023 (1hr 11mins)

Stage Analysis members weekend video covering the Major US Indexes, Futures Charts, Industry Groups Relative Strength (RS) Rankings, IBD Industry Group Bell Curve – Bullish Percent, Significant Weekly Bars, Crypto Coins update and the US watchlist stocks in detail on multiple timeframes.
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