market-breadth

Market breadth analysis assesses internal market health by comparing index price action against constituent-level breadth indicators. It calculates advance-decline lines and moving average participation to reveal whether an index rally is broad-based or driven by a narrow group of large-cap stocks.

Cap-weight versus equal-weight divergence is a market breadth indicator that evaluates internal index health by comparing cap-weighted index performance against equal-weight calculations. It identifies whether large-cap stocks are masking broader constituent weakness during a market advance.

Calculating advance-decline lines requires constituent-level price history and index data to track the cumulative difference between advancing and declining stocks. This participation analysis measures the percentage of constituents above moving averages to confirm underlying trend strength.

Market breadth analysis is needed for portfolio exposure adjustment when an index makes new highs but internal breadth indicators deteriorate. Identifying this divergence supports quantitative analysis and risk management by revealing if a trend is fragile and requires reducing exposure.

Market breadth analysis requires constituent-level price history and index data to evaluate internal market health. Without individual constituent price data, the skill cannot calculate advance-decline lines, moving average participation, or cap-weight versus equal-weight divergences.

Using moving average participation for risk management is limited when a market advance is driven by a narrow group of stocks, causing deteriorating breadth indicators. It is most effective for confirming trend strength rather than predicting exact market reversals in isolation.