There are several classes of indicators I routinely follow to track market strength and weakness. These include measures of sentiment, breadth, momentum, volatility, correlation, and market participation (behavior of large market participants). Among these measures, there is often considerable statistical overlap. Because they are correlated, they are not truly measuring different things. In an upcoming post, I will address this issue by discussing purified indicators--ones in which overlap has been removed, so that we are looking at purer forms of sentiment, breadth, etc. For an inspiring example of purification, check out this paper from David Aronson highlighting his construction of a purified VIX measure.
Above we see three current measures of market breadth. The top chart tracks the sum of 5, 20, and 100-day new highs minus new lows among all shares in the Standard and Poor's 500 Index. The middle chart looks at the average of the percentages of stocks in that index that are trading above their 3, 5, 10, and 20-day moving averages. The raw data for both these measures come from Index Indicators. The bottom chart displays the sum of stocks across all exchanges that are making fresh three-month new highs minus new lows.
Note that the three measures tell a similar story: Peaks in breadth tend to precede price peaks for intermediate-term market cycles. Until recently, successive breadth peaks were occurring at fresh price highs for the broad market. During this most recent cycle, we've seen lower peaks in breadth and a failure of breadth strength to generate fresh price highs. All of this is suggestive of a weakening/topping market, as recent buyers have not been able to sustain the market uptrend.
Further Reading: Tracking Breadth Across Cycles