9:49 | 05.02.2010
eResearch TECHNICAL OPINION: Market Breadth Charts
Using Short Term Market Breadth To Time The Market
One way to get a better understanding of when a market is about to change direction, is to track how
many stocks within a group are performing well, vs. how many are performing poorly.
This type of analysis is part of a larger group of analysis commonly referred to as Market Breadth.
Within a given timeframe, we can look for imbalances in the market, or when too many stocks are
performing well, vs. too many stocks are performing poorly.
Common techniques for using this type of analysis include locating overbought/oversold levels and
finding positive or negative divergences between them and the underlying group’s composite index.
This type of group or crowd analysis can seem counter intuitive for many, as it is right when everyone
has come to the same decision that the market will actually turn in the exact opposite direction.
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