---
title: 'Three Breadth Indicators to Confirm a Bullish Thesis'
source: 'https://www.youtube.com/watch?v=WEX3NmP8jtw'
video_id: 'WEX3NmP8jtw'
date: 2026-09-14
duration_sec: 697
channel: 'Market Misbehavior with Dave Keller, CMT'
---

# Three Breadth Indicators to Confirm a Bullish Thesis

> Source: [Three Breadth Indicators to Confirm a Bullish Thesis](https://www.youtube.com/watch?v=WEX3NmP8jtw)

## Summary

Dave Keller explains three key breadth indicators that can confirm a bullish stock market outlook: the NYSE advance/decline line, the percentage of S&P 500 stocks above their 50-day moving average, and the expansion of 52-week highs. He applies these to the current market context where the S&P 500 is testing all-time highs after a September pullback.

### Key Points

- **Breadth indicators defined** [00:00] — Breadth indicators measure market participation, showing whether individual stocks confirm or diverge from index moves like the S&P 500 or NASDAQ.
- **Market context: September pullback** [00:42] — The S&P 500 topped in early September, fell 5-6% during a distribution phase, and by October was retesting all-time highs near 4550.
- **Chart setup: four panels** [02:07] — The chart shows the S&P 500, NYSE advance/decline line (common stocks only), % of S&P above 50-day MA, and 52-week highs/lows for the S&P.
- **Advance/decline line basics** [03:33] — The AD line cumulatively adds daily advancing minus declining stocks. It should rise with the market, but divergences (like Jan-Feb 2020 and Jun-Aug 2021) signal weakness.
- **AD line current status** [05:06] — The AD line has reverted above its 50-day MA; a key test is whether it exceeds its August-September swing high to confirm new index highs.
- **% above 50-day MA indicator** [05:33] — This indicator fell to ~25% at end of September, meaning only 25% of S&P stocks were above their 50-day MA. It has since rebounded to 64%, signaling improved participation.
- **Bullish confirmation thresholds** [07:06] — For a bullish thesis, the % above 50-day MA should stay above 50% and ideally increase. Readings below 50% indicate pullbacks or corrective phases.
- **New highs expansion** [08:00] — In a healthy bull market, more stocks should be making 52-week highs. If only mega-caps drive index highs while new highs shrink, it signals trend exhaustion.
- **Three indicators to watch** [10:02] — The three breadth indicators—AD line, % above 50-day MA, and new highs expansion—should all remain in bullish territory to confirm the bull market thesis.

### Conclusion

If these three breadth indicators continue to show strength, they validate the bullish outlook for stocks, suggesting the S&P 500's retest of highs is not a double top but a continuation.

## Transcript

Hey guys, Dave Keller here with Market Misbehavior, and I'm often talking about breadth indicators. Breadth indicator is basically our measure of participation. They tell you when the overall market and broad index like the S&P or the NASDAQ are doing one thing,
what about all the individual stocks that make up those indexes, make up those markets? What are those doing? Are they confirming or not confirming what the indexes are doing? So today we're going to talk about three breadth indicators that would confirm a bull market.
So the S&P 500 and the NASDAQ made new all-time highs most months in 2021, pretty consistently up until September.
Early September, the S&P topped out. The month of September ended up being sort of a distribution phase with the S&P down 5% or 6%. And now in the month of October, so far, we've seen a reversion back higher
and the S&P retesting all-time highs. Well, underneath the performance of the overall index is we can look at market breadth, and these are ways of measuring participation. What I mean by that is the S&P 500 is comprised of 500 individual names.
What are those 500 stocks actually doing? Now, you could look at 500 individual charts and sort of make sense of them, or you could look at a breadth indicator that aggregates all those 500 charts into one indicator that you can use.
So today we're going to talk about three particular breadth indicators. what they're saying right now and what they would need to say to confirm a bullish outlook for stocks. Before we get to the chart, though, I just want to remind you, if you're sort of thinking of investment decision-making, behavior, psychology, trend, momentum,
all that and more is of interest to you, I hope you'll subscribe to my channel. It would be great to have you along to drive with us. Also, give the video a like if you appreciate it. We'd very much appreciate that. Back, finally, put a comment below the video. Do you buy into the bullish thesis driven by stronger breads or not?
Let me know in the comments below and why. Let's get to the chart. All right. So we're looking at one chart here with four different data spheres. We'll go from the top here. The S&P 500 going back for the two years just on a daily closing basis.
Next, we have the advanced decline lines of the New York Stock Exchange. And this is using common stocks only. And what that means is it removes things like closed-end funds and bond funds and stuff like that that are listed on the NYSE.
But we're trying to get a sense of the stocks that comprise the major indexes and what they're doing. Next, we have the percent of S&P 500 numbers above their 50-day moving average. At the bottom, we have the new highs, new 50-week highs, and new 50-week lows for the S&P 500.
Let's start at the top and go down. So, as I mentioned in the introduction, the S&P 500 over the long term has been an undeniably strong uptrend. If you look, though, this last month, September, was certainly a weaker month.
The S was down about 4 5 6 depending on how you measure it on a closing basis about 5 to 6 And since then it sort of made a new high into early September really went down for
most of the month of September. And then from October 1st on, we've sort of rotated back to the upside. So overall, the S&P is once again testing all-time highs at 4550. If and when that level is eclipsed, strong likelihood that the S&P continues higher,
Once resistance is broken to the upside, there's certainly a lot of further upside potential for any chart, particularly for the S&P 500. Let's look at three particular breadth indicators and what they're telling us. The second series in green is the New York Stock Exchange Common Stock Only, ADY.
So it's looking at only individual stocks, common stocks. And it's an advanced decline line, which means every day you take the number of stocks closing higher, the number of stocks closing lower. that gives you a daily advance decline reading.
A cumulative advance decline line, which is what this is doing, sort of adds together those daily readings, and it gives you a cumulative trend on the S&P, or on the New York Stock Exchange. So it would make sense that when the market's going down in general,
the advance decline line should be going down because more stocks are probably closing lower than higher over a period of time. When the market goes higher, you'll find the AD line tends to go up as well over time because it makes sense as the market is going higher,
that on a string of days, on average, more stocks will be closing higher versus lower. And as a result, the terms go positive. It is not always the case. So if you look in January to February of 2020, the S&P actually went higher, while the advanced
decline was actually sloping lower. If you go to June, July, August of 2021, the S&P making a higher high through most of that stretch, and the advanced decline line was actually not confirming those all-time highs.
And that's when a lot of the cyclical stocks stopped out in sort of May and June. It kind of came off. Things like energy, financials, and industrials. And as a result, many of those stocks are actually closing down on a lot of random days,
while the S&P itself was going higher, driven by the mega-cap tech and consumer and communications trade. Overall, we're starting to see a reversion back to the upside. You're seeing the advanced decline line get back above its 50-day moving average.
My question would be, does it get above that previous swing high, which would be August and September, which is not too far above where we're at right now. You'd want the advanced decline line to confirm a new high, especially as the S&P does.
A concerning pattern would be the S&P making new all-time highs, the NASDAQ making new all-time highs, and the advanced decline lines, the 80 lines, not confirming those new highs. That can be an area of concern. That's kind of what happened in January, February of 2020.
The second indicator below, the next one below that, is the percent of stops above their 50-day moving average. Now I recorded other videos on this channel about this particular indicator and why the 50 moving average is such an important one to look at Indeed for the S 500 through much of 2021 until a month ago or about six weeks ago in early September
the S&P had remained above its 50-day moving average the entire year. It closed below it a couple days, but every day, if it did, it would go right back up and close back above it. It served as support through much of 2021.
That all changed in September, and now you see the S&P getting back above its 50-day moving average in October. A lot of individual stocks are also getting back above their 50-day moving average, and that's what you can tell here. This tells you how many stocks, what percent of stocks in the S&P are above their 200-day.
At the end of September, excuse me, 50-day moving average. At the end of September, this value was around 25%. Only 25% of S&P stocks were above their 50-day moving average. 75% were below, just like the S&P 500 itself was below its 50-day.
Now that number is back up to 64%, which means about 40% of the S&P members were below their 50-day moving average about three weeks ago, two and a half weeks ago, and now have rotated back above the 50-day, just like the S&P has done.
So what you would want to see to sort of confirm a bullish thesis, number one, would be this indicator moving higher, particularly now as the S&P is making new highs. You want more and more stocks regaining their 50-day moving average and staying there.
And that gives you a second point. You want this to remain above 50%. When this indicator is above 50%, that's going to do over half of the S&P members are above their 50. That's the sign of a healthy bull market environment.
When the indicator gets below 50%, which it did here in June, it did here in September, it did last year in September and October during that sort of two-month, eight to ten week, we'll call it, corrective period, September through November of last year,
the indicator did below 50% a number of times. A lot of short-term pullbacks, the indicator won't get much below 50%. That reminds you that it's not too bad of a pullback. So that indicator getting back above 50% is a check in the bullish column.
It remaining above 50% and increasing ideally would be more and more of a positive sign for stocks. Finally, we get to the third panel at the bottom, or the bottom panel, which is the number of stocks making new highs and new lows.
Now, it's looking at 52-week highs and 52-week lows. So how many members of the S&P on any given day are at the highest point they've been for the last 52 weeks in the same 52-week low. So the green bars represent the number of 52-week highs.
The red bars, which you see just a little bit of recently, but go back to March of 2020 to see what happens during an extended bear market move or a corrective move. You have a lot more stocks making new lows and very few stocks making new 52-week highs.
So as you can see, there have been very few 52-week lows in the last 18 months or so. And that's sort of what usually happens in an extended bull market day. Sort of everything continues to go higher. Here the kick of it In a healthy bull market environment particularly when the S is making new all highs you want more and more individual stocks also making new 50 highs Here what will happen when things are not quite right
The S&P and the NASDAQ make new highs. It's not because a lot of individual names are doing it. It's because some of the mega cap stocks are trading higher, right? It's the Facebooks, Amazons, Netflixes, Microsofts, Alphabets,
and I put plurals into each of those names of those companies on purpose. You know, it's all those types of stocks, those mega cap names. If the numbers go higher, that can propel the S&P higher. But these green bars increasing over time shows that it's not just a small number of mega cap stocks making new highs.
It's a lot of individual names. And as we get further and further to new highs, you want to see that the S&P goes to new highs. You want to see this breadth indicator go to further and further new highs as well.
I always talk about looking for an expansion in new highs. You want more and more stocks that are breaking to new highs along with the indexes themselves. Because when the index is going higher and there are less and less new highs, that usually happens at the end of the bull market phase when the trend is exhausted.
A lot of stocks that had been working start to rotate lower, and it's just a defensive mega cap stuff that still continues to go higher. So that is the chart that I would present to you today, indicating three breadth indicators to pay attention to.
Number one, the advanced decline line in the New York Stock Exchange, common stock only. Number two, the percent of stocks above their 50-day moving average. Number three, an expansion in new highs. Making sure all three of those remain in bullish territory, I would argue, should give more emphasis to the bullish thesis here for stocks.
So there we go. These are three breath indicators that I think are key to watch right now that could confirm a new bullish thesis. As the S&P is testing new all-time highs, a lot of comments. and questions will be made and observed about whether or not we just had a big double top,
meaning the S&P established a previous high and we're just testing that same level. The way we confirm or validate that that is most likely not the case, that the S&P has further to go, is if breadth of the carrier is likely, the advanced decline line, the percent of stocks above the 50-day moving average,
and the new highs list, as long as those continue to remain in bullish territory and continue to show signs of strength, that should give further validation, validation for their emphasis to the bull market thesis for stocks.
If you're sort of thinking about investment decision-making and behavior, charts, technical analysis, behavioral finance, all of that is of interest to you. I hope you'll subscribe to my channel. Also, give the video a like if you appreciated it. We would very much appreciate it back.
Put a comment below my video. Do you agree with my thesis that these breadth indicators confirm a bullish outlook for stocks? Yes or no? Let me know in the comments below and why. For everyone in marketing this behavior, I'm Dave Keller. Be well, stay safe, talk to you soon.
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