Recent breadth indicators on the US stock market have sent a strong signal for what may lie ahead.
For well over a year now, investors have been closely watching the US stock market, trying to make sense of its strong recovery in the midst of rocky global markets. But it wasn’t until the last few weeks that long-term breadth indicators began giving a truer picture of the current state of the market.
In order to understand how the market is doing at any given time, experts pay attention to what’s known as long-term breadth indicators. That’s essentially a measure of how many stocks are advancing and declining over a three-month period. This metric is considered more reliable than any single days performance, instead giving a better view of how broadly the market is performing.
According to the latest readings, these indicators are now at their lowest level in nine years. This means that in the last three months, the percentage of stocks making gains has been roughly equal to the percentage of stocks falling.
This has significant implications for what the next few weeks of the US stock market could bring. Most importantly, it suggests that current market performance has largely been driven by a select group of stocks, rather than being broadly based and reflective of overall market conditions.
That could mean that the stock market could be due for a reversal of fortunes, as investors take profits and cash out of sectors that have recently seen the most gains. On the other hand, if the recent trend holds, it could also indicate that the bull market of the last few years is still healthy and substantive gains could yet be made.
Whatever the result, the long-term breadth indicators have given investors a moment of truth when it comes to the true state of the US stock market.
Recent breadth indicators on the US stock market have sent a strong signal for what may lie ahead.
For well over a year now, investors have been closely watching the US stock market, trying to make sense of its strong recovery in the midst of rocky global markets. But it wasn’t until the last few weeks that long-term breadth indicators began giving a truer picture of the current state of the market.
In order to understand how the market is doing at any given time, experts pay attention to what’s known as long-term breadth indicators. That’s essentially a measure of how many stocks are advancing and declining over a three-month period. This metric is considered more reliable than any single days performance, instead giving a better view of how broadly the market is performing.
According to the latest readings, these indicators are now at their lowest level in nine years. This means that in the last three months, the percentage of stocks making gains has been roughly equal to the percentage of stocks falling.
This has significant implications for what the next few weeks of the US stock market could bring. Most importantly, it suggests that current market performance has largely been driven by a select group of stocks, rather than being broadly based and reflective of overall market conditions.
That could mean that the stock market could be due for a reversal of fortunes, as investors take profits and cash out of sectors that have recently seen the most gains. On the other hand, if the recent trend holds, it could also indicate that the bull market of the last few years is still healthy and substantive gains could yet be made.
Whatever the result, the long-term breadth indicators have given investors a moment of truth when it comes to the true state of the US stock market.
