Bulls vs. Bears: The Market Breadth Score
By Alexandra Guevara
Volatile and oscillating markets can often make it difficult to discern broader investor sentiment and market direction.
For active traders, however, volatility is a blessing in disguise, as it provides short-term opportunities for traders who are buying the oversold dips and selling the overbought peaks. To identify these overbought or oversold levels, technicians use a variety of technical or quantitative indicators. In this TradeStation Labs Report, we introduce an indicator that may be used to identify short-term market moves using market breadth.
Figure 1 below is an image of the Market Breadth Score indicator plotted below the S&P 500 Index. When the average Market Breadth Score is increasing or above 0, it indicates a more bullish sentiment in the market. When it is decreasing or below 0, it signifies a bearish sentiment. The higher the score, the stronger the signal for a bullish trend. Conversely, the lower the score, the stronger the signal for a bearish trend.
This article was originally published at TradeStation.com and reproduced with their written consent.