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General Observations

The stock market is likely to be on firmer footing when strength in the daily- and, weekly-based advance-decline lines confirm strength in the various indices that reflect different sectors of the stock market. In other words, new highs in indice such as the Standard & Poor’s 500 Index should be confirmed by new highs in the weekly- and daily-based advancedecline lines, and vice versa.
Stock market technicians frequently take negative note of periods in wluch market breadth readings fail to confirm new highs in market indices such as the Standard & Poor’s 500 Index and the Dow Industrials, but bear markets have starled during periods that market breadth readings have remained stronger than readings of popularly followed market indices. For example, the 1981-1982 bear mark € started with more apparent weakness in major market indices than in the advance decline limes, but eventually the declime spread across the entire stock market universe.
The stock market prefers strength in all of its areas. Although it is probably better if measures of breadth lead market indices than vice versa, universal strength best.
It is more bullish for stocks when peaks in major market indices are confirmed by new peaks in the advancedeclime lines, or when new lows in market indices are unconfirmed by new lows in the advance-decline lines.
Again, unanimous strength is best. But if you have to choose, breadth strength in generally the most decisive, especially if your portfolio includes a fairly high percentage of broadly based, smaller company-oriented mutual funds that tend to track with market breadth measurements.
Market breadth data is available for Nasdaq-based as well as New York Stock Exchange-based markets. The advance-decline line of the Nasdaq Composite Inde often provides clues and cues that are not apparent in the price action of the Nasda
Composite Index alone.
The price level of the Nasdaq Composite Index is frequently more influenced by a relatively smaller group of companies than the price levels of either the New York Stock Exchange Index or the Standard & Poor’s 500 Index. Certain mutual fund and ETFs reflect larger-capitalization companies such as Microsoft and Intel the trade on the Nasdaq, but mutual funds that invest in emerging companies usually more closely reflect the Nasdaq advance-decline line in their price movement. The level of strength in the advance-decline limes of the various market sectol can be tracked with rate of change measurements that rdect changing paftems i the strength of market breadth.

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