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Market Breadth

Overview

  • market breath is way to gauge current market Health
  • Market breadth measures the degree of participation & the conviction in the overall mood of the underlying index
  • There's multiple indicator this job some uses percentage, some used new highs and lows
  • I mostly rely on NSE Percentage of Stocks because it's very dynamic and can be checked for daily basis

NSE Percentage of Stocks

  • NSE Percentage of Stocks is a market breadth indicator that measures the percentage of stocks in the Nifty 50 index that are trading above their 10/20/50/200-day moving average.

  • Sample Data for Percentage of Stock above 10,20 and 50 Day Moving Average

    Date 10 20 50
    17 May 64.49 56.8 54.95
    16 May 54.26 50.31 49.23
    15 May 50.85 47.41 47.77
    14 May 43.38 40.45 44.92
    13 May 24.31 27.87 37.49
    10 May 21.25 27.52 38.50
    9 May 14.43 21.77 34.96
    8 May 28.89 38.48 47.10
    7 May 22.82 33.18 44.62
    6 May 35.16 47.21 53.71
    3 May 49.08 60.56 62.00
    2 May 60.74 67.35 65.40

  • I am only interested in percentage of stock 10,20,50 day

  • I mostly look at 10 and 20 day percentage value to figure out daily trend. 50 day is trend confirmation

  • This table explains how to interpret percentage of stock above 10/20/50 day moving average and what action to take based on it.

    Percentage Market
    0-20 Oversold
    20-50 Weak market
    50-80 Healthy Market
    80-100 Overbought Market

  • When Should I start Buying

    Above 50% Action
    10 25% Market Exposure
    21 50% market exposure
    50 Go all in

  • When shoud i start selling

    below 55% Action
    10 No New Buy, Start Booking Profits, basically sell anything below 10EMA or low profit margin
    20 Sell everything without profit margin
    50 Sell everything and move to cash

  • From Sample data you can clearly identify when market starting get weak from 2-3 may to 6-7 may

  • This is my current favorite method to adjust my market exposure, this is much more reliable than just watching index

Tip

It's hard to pin point exact moment when market turn bad, so just use your best judgement. Also when market look bad don't focus on risk reward when booking profits just sell, don't try to be perfect.

Net New Highs and Lows

  • Displays the net number of stocks on NSE (India) making 52-week highs or lows. The count is displayed as a fraction of the total number of stocks in the NSE universe.
  • Net New Highs (NNH) are calculated by taking the number of new 52-week highs on any given day and subtracting from it the number of new 52-week lows.
  • A market is considered strong (bullish) when NNH are positive, or, in other words, when new highs exceed new lows.
  • We consider the bias as positive (bullish) when NNH stays positive for 3 consecutive days, & negative (bullish) when NNH stays negative for 3 consecutive days.

  • Sample data for Net New Highs and Lows

    Date NNH NNH Percentage
    17 May 0.12 12
    16 May 0.08 8
    15 May 0.05 5
    14 May -0.02 -2
    13 May -0.10 -10
    10 May -0.15 -15
    9 May -0.20 -20
    8 May 0.05 5
    7 May 0.10 10
    6 May 0.20 20