Breadth Divergence
Now: 65.3% above the 50-day, 0.38% at new lows, 5.5% at new highs.
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A drop in the share of stocks above their 50-day means two different things, and the new-low count on the same basket says which. Measured on 535 names back to 2007: a 10-point breadth fall in five sessions is followed by a month positive 62% of the time against a 67% baseline — worse than nothing on its own. Split it by new lows and the halves separate, 66%/79% when new lows stay under 1% of the basket against 52%/64% when they clear 3%. The split survives holding the breadth level constant, so it is not a level proxy. Also reports the two findings that cut the other way: the signal is asymmetric, and drops that leave breadth mid-range resolve worse than ones that wash it out.
- 4987 sessions since 2007-01 on 525 common stocks.
- Now: 65.3% above the 50-day, 0.38% at new lows, 5.5% at new highs.
- A breadth drop with quiet new lows resolves above baseline; the same drop with new lows confirming resolves well below it.
When to run this study
Run after any sharp breadth deterioration — the study exists to answer "is this a pullback or a breakdown", and the new-low count is what settles it. Also worth a look when breadth is fine but new lows are creeping up, which is the configuration that has historically preceded trouble. Not an entry trigger: there is no position to size off a breadth reading.
Historical results
Sharp breadth drops, split by the new-low count
| Condition | Events | 1M | 1M win | 3M | 3M win |
|---|---|---|---|---|---|
| ALL SESSIONS (baseline) | 4966 | 1.60 | 67 | 4.14 | 74 |
| Sharp breadth drop, unconditional | 232 | 1.53 | 62 | 4.95 | 73 |
| Drop + new lows quiet (<1%) | 137 | 1.97 | 66 | 5.63 | 79 |
| Drop + new lows confirming (>=3%) | 87 | 1.10 | 54 | 4.21 | 65 |
| Drop but breadth still >=55% | 111 | 1.25 | 61 | 4.44 | 70 |
| Drop washing breadth under 40% | 104 | 2.75 | 67 | 4.55 | 76 |