Here are updated charts for what we might call the breadth of market strength and weakness. (Raw data from the excellent Stock Charts site.) Any individual stock can give a buy or sell signal according to rules from a technical trading system. The top chart reflects Wilder's Parabolic Stop-and-Reverse (SAR) system; the middle chart tracks a system based on Bollinger Bands; and the bottom chart follows a system derived from Lambert's Commodity Channel Index. The charts reflect the balance between buy signals and sell signals for all NYSE stocks on a daily basis. They thus capture the breadth of strength and weakness for the general market.
As a whole, the signals tend to top out ahead of price during intermediate-term market cycles and bottom shortly ahead of price. Of the three systems, the SAR tends to be the fastest moving (greatest lead times); the CCI the slowest. When all are in sync, turning lower or turning higher, we generally find ourselves in the relatively early phase of a trending move. I find the interplay among the signals to be helpful in identifying where we're at in those intermediate-term cycles.
Note that SAR has recently turned negative, despite the recent price strength. The Bollinger Band measure is coming off a high reading but remains positive. The CCI system recently gave a high reading, which has preceded the most recent market strength. It has fallen off that high but remains neutral. As a whole, the signals are showing reduced breadth of market strength, but not net weakness--consistent with the waning breadth readings noted in yesterday's post.
Further Reading: Tracking the Breadth of Market Strength