Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Wednesday, October 6, 2010

Market Breadth

Stock Market Technical Analysis

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Very little changed in the charts today, basically a sideways day overall.  I am going to take this opportunity to discuss market breadth for a moment.  Market breadth is commonly measured by the % of stocks above their 50 day moving average.   Major legs up in the S&P 500 index often take it to the point that 90% of its stocks are above their 50 day moving averages.  This 90% level is where most major rallys end and major down legs begin in the market. When we get above 90% we are considered to be entering bubble territory.

Yesterday's big short squeeze in the market took the S&P to the 91% level.  If they take us higher, even the bulls may begin to voice concerns.  This might be a good place to tighten your stop loss settings on open trades.