Here’s How the Market Breadth Behaves Before a Stock Market Crash

https://finance.yahoo.com/news/market-breadth-behaves-stock-market-113842940.html

The Market Breadth vs S&P 500 in 2021

In Nov 2021, the market breadth had another sharp drop below the 0 level with a large magnitude similar to 2018’s and 2020’s, yet S&P 500 is just 3 % away from the all-time high.

After the drop in Nov, there was an attempt to rally above 0 level in the market breadth with almost immediate rejection. This is similar to 2018’s scenario but with a stronger S&P 500. This is mainly because of the weightage in S&P 500’s components (similar to Nasdaq 100). Refer to the price volume analysis on 5 of these heavy weight stocks. When these stocks fail to hold, S&P 500 will start to crack.

In this bifurcated market, one could trade in either direction with care as it is expected to have high volatility in both directions. A break below 4600 should trigger more selling in S&P 500 to test the swing low at 4500.