What is market breadth and how can it influence your investing strategy? JC Parets, founder and chief strategist at All Star Charts, discusses the composition of the Nasdaq and NYSE and how it impacts breadth interpretation.
He spoke with Yahoo Finance’s Jared Blikre and Sydnee Fried on “Stocks in Translation.” Listen to the full episode here, or wherever you get your podcasts.
This post was written by Jimi Corpuz
Video Transcript
Want to get to our word of the day, which is breadth and market breadth analyzes.
This is according to investopedia analyzes a number of stocks advancing relative to those that are declining in a given index or stock exchange.
For example, positive market breadth can occur when more stocks are advancing than are declining.
And it suggests that the bulls are in control of the market’s momentum.
So this confirms price in the index itself.
So it confirms price and it’s the opposite for negative breadth.
And I will add that breadth can be measured in a number of ways.
You could take the number of stocks that are advancing minus the minus the the ones that are declining.
That’s called the advanced decline line.
You can measure stocks, the percentage of stocks above the 200 day moving average above the 50.
And I know this is something you look at.
So how do you, what do you, how do you think about market breadth?
Yeah, I mean, I I think it’s important for investors just to remember that this is a market of stocks, right?
It’s like, oh what the dow do today and the yelling and the, this guy, right?
Like, it’s a market of stocks.
There’s a bunch of stocks in the New York Stock Exchange.
There’s a bunch of stocks in the NASDAQ.
You gotta, you have to and then remember what types of stocks are in those indexes, right.
What is it?
Like, half of the largest 100 companies in the New York Stock Exchange aren’t even from America, right?
Like, you got a very diversified group there.
a lot more cyclicals in the New York Stock Exchange in the NASDAQ, you have a long tail of very low quality junk that the New York Stock Exchange would simply does not have.
So you’ve got a lot more.
So when you think about market breadth of the NASDAQ, remember what stocks are you’re looking at?
Like there’s a lot of garbage in there.
That doesn’t matter.
I say just say that I, what I really appreciate Jay Z is that, you know what you’re talking about that you’ve looked into the composition of these indices.
You’re not just repeating stuff.
You hear, you understand what you’re talking about and you come to your own conclusion.
So, thank you for that.
