This Metric Can Predict the Market’s Next Move

[Trading With Larry Benedict]( This Metric Can Predict the Market’s Next Move By Larry Benedict, editor, Trading With Larry Benedict The election, the Federal Reserve meeting, corporate earnings… We can plan on the market having lots of knee-jerk reactions to headlines in the coming days. But you can cut through the noise – and get an upper hand on the stock market’s next turn – with one key market metric… I’m referring to “breadth.” Breadth refers to how many stocks are participating in the market’s trend. And it can be a clear indicator of that trend’s resilience. When the S&P is trending higher but fewer stocks are participating in the rally, that’s a sign to be on the lookout for a reversal. Alternatively, when lots of stocks start performing well in a market downtrend, good times could be ahead. So today, let’s look at one way of measuring breadth – and how this metric can predict major turns in the S&P 500… Recommended Link [Advertisement for Nvidia, Apple, Tesla, and Google stock recommendations]( New Demo Shows How One Stock Can Fast-Track Retirement Normally it takes around one year to make 7% from the Dow. But Market Wizard Larry Benedict has shown everyday folks how to invest in the Dow and make 19% in 1 day, 66% in 6 days, 100% in 6 days, and more! What's his secret? [Larry reveals everything here >>]( Tracking the Average Stock There are many ways to look at stock market breadth, but the goal is the same. You want to measure the performance of the average stock and check if it’s keeping up with the indexes. One simple way is to look at how many stocks in an index are trading above their 50-day moving average (MA). I refer to the 50-day MA frequently in my charts. It’s a good way to determine if a stock is trading in an intermediate-term uptrend. When the S&P 500 is pushing higher, you want to see a large percentage of underlying stocks trading above their 50-day MA. If that figure starts to lag while the S&P is moving higher, that signals a crumbling foundation in the uptrend. Let’s take a look at how this breadth metric has called some major turning points in the S&P 500 over the past year… Free Trading Resources Have you checked out Larry’s free trading resources on his website? It contains a full trading glossary to help kickstart your trading career – at zero cost to you. Just [click here]( to check it out. Breadth Forecasts Key Turning Points A “breadth divergence” is when the stocks trading above their 50-day MA start behaving differently than the index. Take a look at the chart below. The top half shows the S&P 500’s price action. The bottom half reveals the percentage of stocks in the S&P 500 trading above their 50-day MA. [chart] ([Click here to expand image]( The chart covers last September and through the end of May this year. Last October, the S&P made a lower low in price from “1” to “2.” But notice that the percent of stocks trading above their 50-day MA improved (the left trendline). That showed fewer stocks were in a downtrend as the S&P bottomed. Then look at the index from “3” to “4.” As the S&P rallied to new highs, the percentage of stocks in an uptrend moved lower. From there, the S&P 500 pulled back. Now let’s look at more recent price action in the chart below… [chart] ([Click here to expand image]( As the S&P 500 rallied from “1” to “2” in October, the percent of stocks trading above their 50-day MA made a lower high (the dashed line). From there, the S&P pulled back about 3% through the end of the month. Now the S&P 500 has jumped to new highs following the election this week. But only 60% of stocks in the S&P 500 are trading above their 50-day MA (the circle). So breadth will be a key metric to watch in the days ahead. Right now, there are far fewer stocks in an uptrend compared to when the S&P 500 was at a similar level just a few weeks ago. If the average stock doesn’t catch up to the index, this rally could be short-lived… Regards, Larry Benedict Editor, Trading With Larry Benedict [The Opportunistic Trader]( The Opportunistic Trader 55 NE 5th Avenue, Delray Beach, FL 33483 [www.opportunistictrader.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. The Opportunistic Trader welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact Customer Service, call toll free Domestic/International: 1-888-208-6550, Mon–Fri, 9am–5pm ET, or email us [here](mailto:feedback@opportunistictrader.com). © 2024 Omnia Research, LLC. All rights reserved. Any reproduction, copying, or redistribution of our content, in whole or in part, is prohibited without written permission from Omnia Research, LLC. [Privacy Policy]( | [Terms of Use](