Market Breadth
A measure of how many stocks are participating in a market move, used to gauge the health and sustainability of a trend.
What is Market Breadth?
Market breadth refers to the number of individual stocks advancing versus declining within a given market or index, and is used by technical analysts to assess whether a price trend has broad participation or is driven by only a few large-cap names. Strong breadth — where the majority of stocks are advancing — suggests a healthy, sustainable rally. Weak breadth — where an index rises but most constituent stocks decline — is viewed as a warning sign of an underlying deterioration. Common breadth indicators include the advance-decline line, the percentage of stocks above their 50-day or 200-day moving average, the number of new 52-week highs versus lows, and the McClellan Oscillator.
Example
In late 2023, the S&P 500 index climbed to new highs, but market breadth indicators revealed a concerning divergence: the rally was concentrated in just seven mega-cap technology stocks dubbed the Magnificent Seven. The equal-weighted S&P 500 index — where every stock has the same influence — lagged significantly, signaling that most stocks were not participating in the market advance.
Source: Investopedia — Market Breadth