Market Breadth - A unique way of finding Trend for the Entire Market
What is Market Breadth after all?
It is now a well known fact that one can make money in Stock Market ONLY through Swing Trading, getting in and out of stocks within a matter of days or weeks. Long term investments are prone to extreme fluctuations in stock markets and expose to potential risk of losing more than you would have gained during a bull run. Hence, how do you invest smartly? By gauging what the market is saying. And how do you do that? You use DLNGroup.com's Proprietary Market Breadth to find out which way stock market will potentially make it's move. Let us explain this with an example to make it more clear.
Look at the chart below. From July 04 to July 09, 5 years, each time Market breadth indicator crossed above the 80 level, market corrected. It happened 8 times and market breadth indicator proved write 7 out of those 8 times. Same goes with the market reversal from bearish to bullish mode as is evident from the bottoms that this indicator formed before starting to move back up.
Now Look at the chart below. This is the SLOWER version of Market breadth. This version is a smoothened version of the original Market Breadth. Since this is a slower version, the tops and bottoms are NOT that frequent. Hence, we had to take a 10 year chart as opposed to a 3 or 5 years one. There are a couple of ways to interpret this chart.
- Whenever the chart hits extremes of either above 80 or below 20, it exhibits cautionary mode and potential reversal of trend.
- As you can see from the chart below, almost everytime this slow indicator went down AND started to move up, rallies were witnessed in the market and vice versa.
How to use the above charts and benefit from it?
These charts tell you ahead of time which way the markets would potentially move. For example, a reading of over 80 on either chart would mean caution. Either book profits when this happens or put strict stop losses. May Not a good time to go long though. Similarly, when the reading is below 20, it could mean extreme pessimism in the markets and could indicate good buying opportunity.
Where do i find these charts?
Market Breadth Indicator
Market Breadth Indicator - SLOWER Version
