Market Breadth is an essential metric to take into account when assessing the overall market trend and understanding how closely the performance of certain markets such as stocks, commodities, foreign exchanges, or bonds are linked. In the financial world, the Bears vs Bull Market is a common concept and central to market analysis. The current Bull Run has been going on since 2018 and it has certainly been an exceptional time for the markets.
Recently, however, an unlikely combination called the “Bearish Triad” has been brewing on the horizon. This is a rare, and at times ominous, formation of stock market indexes on three levels – the Dow Jones Industrial Average (DJIA), S&P 500, and Nasdaq Composite – that come into play whenever investors become particularly anxious.
The Bearish Triad consists of all three of the major stock indexes, remaining within 2% of their all-time highs while declining nearly 0% in the past couple of weeks. This anomaly, which hasn’t been seen since October 2018, is a sign of nervousness among investors. It could turn out to be a sign of a pending market selloff or warning of a potential topping out of the Bullish market trend.
To back up these assertions, investors have focused their attention on a few key indicators, one of them being Market Breadth. This is the difference between the number of stocks that have gone up in price versus those that have declined. If there are more stocks increasing in price than those declining, then the market could be seen as having strength. Conversely, if there are more stocks declining in price than increasing, then investors should be concerned.
In the case of the Bearish Triad, market breadth is currently testing an important support level. The VIX volatility index, which is also considered a leading indicator, continues to remain above 20, which signals that investors remain rather nervous.
The current market sentiment is uncertain, and investors continue to wait anxiously to see if this Bearish Triad will hold true. While some investors are on the lookout for an opportunity to go long, others are preparing for a pullback in the market. Whether it will be a minor downturn or a significant one, however, remains to be seen. The only thing that is certain is that a few days or weeks of nervousness could kick off changes in the markets if it hasn’t already started.
Market Breadth is an essential metric to take into account when assessing the overall market trend and understanding how closely the performance of certain markets such as stocks, commodities, foreign exchanges, or bonds are linked. In the financial world, the Bears vs Bull Market is a common concept and central to market analysis. The current Bull Run has been going on since 2018 and it has certainly been an exceptional time for the markets.
Recently, however, an unlikely combination called the “Bearish Triad” has been brewing on the horizon. This is a rare, and at times ominous, formation of stock market indexes on three levels – the Dow Jones Industrial Average (DJIA), S&P 500, and Nasdaq Composite – that come into play whenever investors become particularly anxious.
The Bearish Triad consists of all three of the major stock indexes, remaining within 2% of their all-time highs while declining nearly 0% in the past couple of weeks. This anomaly, which hasn’t been seen since October 2018, is a sign of nervousness among investors. It could turn out to be a sign of a pending market selloff or warning of a potential topping out of the Bullish market trend.
To back up these assertions, investors have focused their attention on a few key indicators, one of them being Market Breadth. This is the difference between the number of stocks that have gone up in price versus those that have declined. If there are more stocks increasing in price than those declining, then the market could be seen as having strength. Conversely, if there are more stocks declining in price than increasing, then investors should be concerned.
In the case of the Bearish Triad, market breadth is currently testing an important support level. The VIX volatility index, which is also considered a leading indicator, continues to remain above 20, which signals that investors remain rather nervous.
The current market sentiment is uncertain, and investors continue to wait anxiously to see if this Bearish Triad will hold true. While some investors are on the lookout for an opportunity to go long, others are preparing for a pullback in the market. Whether it will be a minor downturn or a significant one, however, remains to be seen. The only thing that is certain is that a few days or weeks of nervousness could kick off changes in the markets if it hasn’t already started.
