Breadth Indicators

One of the usual tool to look at change in overall market direction is breadth indicator. There are number of breadth indicator in the market and to get a comprehensive idea about them you should read The Complete Guide to Market Breadth Indicators by Gregory Morris.
Some of the popular breadth indicators are:

• Advancing - Declining Issues
• Advance/Decline Line
• Advance/Decline Ratio
• Breadth Thrust
• McClellan Oscillator
• The McClellan Summation Index
• New Highs-Lows Cumulative
• New Higs-Lows Ratio
• New High/Lows

If you are Telechart user , you will notice it contains 28 different kinds of breadth indicators. one of the most useful out of that is T2108. Itis currently at 14. Levels below 20 on this indicator tend to lead to bounces.

Once you understand breadth indicators, one can develop a market timing model based on such indicators. Such market timing models indicate zones where turns can appear in market and can identify safer periods for using long or short strategies. I developed Market Monitor after studying the breadth indicators commonly used. Market Monitor is a breadth indicator. The key difference between Market monitor and other breadth indicator is that MM uses significant moves to look at breadth.

The Novice Bear has adopted the Market Monitor concept in Blocks and put together a video on how to use it on his site. It is a good video explaining the basic idea.