Market Breadth Charts

TheUpTrend.com

Tuesday - June 30, 2009

Using Short Term Market Breadth To Time The Market

One way to get a better understanding of when a market is about to change direction, is to track how many stocks within a group are performing well, vs. how many are performing poorly.

This type of analysis is part of a larger group of analysis commonly referred to as Market Breadth.

Within a given timeframe, we can look for imbalances in the market, or when too many stocks are performing well, vs. too many stocks are performing poorly.

Common techniques for using this type of analysis include locating overbought/oversold levels and finding positive or negative divergences between them and the underlying group's composite index.

This type of group or crowd analysis can seem counter intuitive for many, as it is right when everyone has come to the same decision that the market will actually turn in the exact opposite direction.

Anytime we see 60% or more of the stocks in our database trading above their 10-day moving average, we should consider the market overbought, and we should expect a short term pullback.

And anytime we see that less than 40% of the stocks in our database are trading above their 10 day moving average, we should consider the market oversold short-term, and expect a reversal higher.

As you will see, we may have to adjust the 40% / 60% rule, based on the sector we are analyzing.

For Short Term Analysis, we might look to see how many stocks are trading above or below the Right Side Channel. Or for people who do not have access to those charts, we might look at the percentage of stocks trading above or below their 10-day moving average.

Read complete article in pdf

Stephen Whiteside
http://www.theuptrend.com
stephen@whiteside.com
This newsletter may not be redistributed without written permission from the author.
Copyright® 2009 Whiteside Analytics. All rights reserved.

Published at Investorideas.com Financial Article Feed : http://www.investorideas.com/RSS/feeds/II-Art.xml
About InvestorIdeas.com: One of the first online investor resources providing in-depth information on renewable energy, greentech and water sectors.

Become an Investorideas.com Member
Gain Exclusive Insight on Leading Sectors, Global Trends, and Insider Trading Ideas, News, Articles, renewable energy and water stocks directory.
Learn more: http://www.investorideas.com/membership

Sign up for free newsletter, stock and sector news alerts at Investorideas.com
click here: http://www.investorideas.com/Resources/Newsletter.asp

Disclaimer: The views and opinions expressed in the research published are those of the individual companies and writers and not necessarily those of Investorideas.comŽ, or any of the industry sector portals . At the time of publication, writers may hold positions in the stocks or companies mentioned.

Investorideas.comŽ or any of the industry sector portals cannot assure accuracy of the research presented. Investors are encouraged to research and verify facts and under no circumstances is Investorideas.comŽ endorsing the content as a recommendation to buy or sell stock.