[00:00] It leaves us with price data, and that's what I really focus on, and that's what we're really
[00:14] going to talk a lot about, specifically breadth data in this presentation. So what is breadth? Breadth is the level of participation by individual stocks. When we talk about the stock market, we really are looking at a market of individual stocks.
[00:29] how these different stocks perform is going to have an impact, obviously, on how the broad indices are going to perform. So a common measure of breadth is looking at simply how many stocks are trading above or below their 200-day moving average. And that's what this chart here looks
[00:46] at going back to 2001 of how many stocks in the S&P 500 are trading above their 200-day moving average. And you can see sometimes we have over 90%. And then during large corrections, we get down into the single digits.
[00:59] Looking at that same chart, but now here's what the market on top, we can see that when we start seeing breadth decline, meaning less stocks are trading above their 200 day moving average, it begins to put some pressure on buyers.
[01:13] It tells us that there's underlying the market, there a lot of selling that happening Look back at 2008 we went from 90 of stocks to when the market actually peaked at 68 And then it finally dropped down to where we basically had almost only 1 of the market
[01:28] trading above by the time the market bottomed. Look at the the mini bear market we had in 2018. In the early in the year, we had 82%. Then when the market was continuing to make new highs, we actually had only 70% of the
[01:42] market that were still trading above its long term average. we had the COVID crash, we saw the market plummet down 20% within a month, and only 3%. Then we saw the market steadily climb. We had almost all the stocks were back above their long-term average at
[01:58] 96%. But as we saw through the summer of last year, and what I wrote a lot about on my blog at athrasher.com, was that we're starting to see a narrowing of breadth. A lot of stocks weren't participating in that rally towards the end of last year. And finally, when the market
[02:13] peaked in january of this year again we only had 74 percent of stocks you notice a commonality that 68 70 74 percent uh is when we saw some major market peaks when we start seeing a lot of stocks
[02:27] a good chunk of stocks are no longer above that moving average the participation rate of the uptrend is starting to be put into question and eventually often the market itself the broad indices begin to contract and that what we seen throughout this year and then the market has So far put in a low We see if it holds in June of this year when we had about 11 Still a lot higher than the prior major market bottoms during prior major bear markets
[02:54] But about 11.7% of stocks in June were trading above its 200-day moving average. As of this week, we're back in the 30s as the market's attempting to rally. We can do the same thing, not just with individual stocks, but we can look at globally.
[03:09] how many different countries are trading above their moving averages where the percent here is above the 200 day and then we also have a shorter time frame above the 50 day and we can see globally are we seeing a lot of healthy equity markets not just in europe or in the us but
[03:24] looking at asian markets um looking at mexico uh looking at south africa looking at egypt looking at all around the world are a lot of a lot of individual country markets are they participating
[03:36] in an uptrend and you can see these began looking at the the percent of countries above the trinity moving average these began actually peaked at 100 um in 2020 and then start the start of 2021
[03:49] but then they began to drift lower you can see there that they they started to move lower by the time we peaked in this year we were barely at even half of the stock of the global markets were above their long moving average so we could see that on the prior chart we started We started seeing individual companies begin to deteriorate And then we started seeing even before that a lot of countries
[04:11] started to begin to show weakness. This is giving us great insight into how stocks are performing. And again, what's going to have a large impact on the actual indices and the trends those indices
[04:24] will start to enter or exit. So looking at the way that we can use this data is looking for improvements. So here's again, looking at the number of stocks above the 200-day moving average,
[04:36] when we go from a very low level, for this example, I'm saying when we have less than 20% of the stocks above their long-term average, and then we move back above 40%, that gives us a
[04:48] really good sign of the market showing strong improvement. There's green lines on the bottom part of this chart showing when we go from 20% to 40%. And you can see oftentimes that gives us a somewhat of an all clear sign that the market's starting to firm up, that buyers are returning
[05:04] to equities, and we start seeing stocks rally. Now, obviously, nothing is perfect. We saw some counter-turn rallies during the dot-com bust, during the financial crisis. But when the market is showing some good strength, when we start seeing more stocks recover,
[05:20] is a good sign that maybe buyers have returned to the equity market. Yeah.