Breadth and Sentiment Indicators
Market breadth measures how broadly a market move is supported across constituents, while sentiment indicators gauge investor psychology. These metrics help distinguish between healthy broad-based rallies and narrow, fragile ones. They complement the dashboard’s sentiment score which tracks analyst consensus.
Breadth and Sentiment Metrics
| Metric | Formula | Use |
|---|---|---|
| Advance/Decline Ratio | Rising stocks ÷ Falling stocks | > 1 = broad participation in rally |
| % Above 200-day MA | Count above SMA(200) ÷ Total | > 70% bullish breadth · < 30% bearish |
| New Highs − New Lows | 52-week new highs minus new lows | Positive = healthy market · Divergence from index = warning |
| Put/Call Ratio | Put volume ÷ Call volume | > 1.0 = bearish sentiment (contrarian bullish) |
| Short Interest Ratio | Short shares ÷ Avg daily volume | > 5 days = high short interest, potential squeeze |
Advance/Decline Ratio
Quote
“The generals may win a few battles, but if the troops aren’t following, the war is lost.”
— Martin Zweig, Winning on Wall Street (1986)
Measures the breadth of market participation in a given move.
| A/D Ratio | Interpretation |
|---|---|
| > 2.0 | Strong broad-based rally |
| 1.0 – 2.0 | Healthy market breadth |
| 0.5 – 1.0 | More stocks declining than advancing |
| < 0.5 | Broad-based selling |
Divergence Warning
When the index makes new highs but the A/D ratio is declining, fewer stocks are driving the rally. This narrowing breadth often precedes market reversals.
Percent Above 200-Day Moving Average
A gauge of how many constituents are in a long-term uptrend.
| % Above 200d MA | Market Condition |
|---|---|
| > 80% | Strongly bullish (potential for overextension) |
| 60–80% | Healthy bull market |
| 40–60% | Mixed / transitional |
| 20–40% | Bearish breadth |
| < 20% | Deeply oversold (contrarian buy signal) |
New Highs Minus New Lows
The net number of 52-week new highs vs new lows across index constituents.
- Consistently positive: Healthy market confirming uptrend
- Turning negative while index rises: Bearish divergence — narrow leadership
- Deeply negative then improving: Potential bottom formation
Put/Call Ratio
Quote
“Be fearful when others are greedy and greedy when others are fearful.”
— Warren Buffett
Quote
“When everybody thinks alike, everyone is likely to be wrong.”
— Humphrey Neill, The Art of Contrary Thinking (1954)
Options market sentiment indicator. High put volume indicates hedging or bearish bets.
| Put/Call Ratio | Interpretation |
|---|---|
| < 0.7 | Complacent / bullish (contrarian bearish) |
| 0.7 – 1.0 | Normal range |
| > 1.0 | Bearish sentiment (contrarian bullish signal) |
| > 1.5 | Extreme fear (historically marks bottoms) |
Short Interest Ratio
Measures the number of days it would take to cover all short positions at average daily volume.
| Days to Cover | Interpretation |
|---|---|
| < 2 days | Normal short interest |
| 2–5 days | Moderate — manageable |
| 5–10 days | Elevated — potential short squeeze risk |
| > 10 days | Heavy short interest — high squeeze probability |
Dashboard Sentiment Context
The dashboard sentiment score measures analyst-derived sentiment:
- Implied Upside: (Target price / current) − 1
- Recommendation: Consensus analyst rating (1 = Strong Buy → 5 = Strong Sell)
The breadth and flow indicators described here provide market-derived sentiment (what traders are actually doing), complementing the analyst-derived sentiment on the dashboard.
Related
- daily-signal-scores — Dashboard sentiment composite score
- technical-indicators — RSI, MACD momentum indicators
- risk-and-volatility-metrics — VIX as a fear gauge
- liquidity-and-flow-metrics — Volume-based flow indicators
- chart-metrics — Drawdown and volatility visualizations