Stock Market Breadth As A Fundamental Analysis (FA) Factor

Stock market breadth is an important FA factor which measures the extent of companies with growing stock prices and is well researched and well known.

Long Term Market Breadth

When the percentage of stocks in the US SP500 above their 150 day MA, is 10 or lower this represents the best time to re-enter a market at the point of maximum pain (or pessimism). Be greedy when others are fearful...

A slightly longer term version of the chart above shows percentage of stocks above their 200 Day MA. If this chart reading hits 20%, the market is extremely oversold. If its at or below 10% then all bets are off and its a case of waiting for the chart to start heading back up before re-entering the that market. 

As can be seen in the GFC 2008/9 the bottom of the chart can maintain a 'ranging' sideways pattern for quite some time. What is likely at the point of max pain is the central banks step in and start printing money again and implementing Quantitative Easing. This is a major green signal and is effectively the only reason we did not see an even worse GFC in 2008 and potentially even more catastrophic fallout from Covid.

DIVERGENCE: Looks for long term divergence on the weekly chart between the percentage of stocks above their 200 day MA...