In last few days the market has had a breadth climax.
Breadth on MM indicators reached extreme readings.
Such extreme readings invariably result in a pullback/correction/long term tops.
At this stage the selling is still slow.
But I see market struggling here.
If you see the top 20 stocks by dollar volume in 4% breakout, you would notice that large stocks have started to roll over.
We are looking at a possible top for this rally.
A 10 to 15% correction is a possibility from here.
Emerging market looked cooked and primed for a drop.
As long as the primary indicator is bullish I am still bullish.
If the 10 day cumulative breadth ratio goes below .5, I will be bearish.
At this stage I would still buy a EP with good catalyst.
Market Monitor Market monitor is market breadth based market timing tool
Current Readings A short term top being formed Earnings season currently on
# of stocks up >4% on high volume
# of stocks down>4% on high volume
# of stocks up >25% in a quarter
# of stocks down>25% in a quarter
This has come back above 300. Below 300 indicates that breadth is at an extreme.
# of stocks up> 50% in a month
At extreme level. If you see the period between 2nd April to 13May, you will see that this indicator went above 100 couple of time. You will also see during that period 2 to 3 big selling bursts. Such extreme readings are not sustainable. Few days ago it was at 172.
# of stocks down>50% in a month
# of stocks up>25% in a month
# of stocks down>25% in a month
# of stocks up>13% in 34 days
# of stocks down>13% in 34 days
% of stocks in confirmed uptrend
This is in bearish territory.
% of stocks in confirmed downtrend
10 day cumulative breadth ratio
#of stocks up> 4% in last 10 days/ #of stocks down>4% in last 10 days
A reading of below 0.5 on this will confirm bearish trend.