Market breadth: Above moving averages

What are Above moving averages metrics?

Above moving averages metrics are market breadth indicators. They show the percentage of stocks in a group that are trading above their own moving average over a given period: 20, 50, or 200 days.

A moving average smooths out daily price swings and shows a stock's underlying trend. When a stock's price is above its moving average, the stock is generally considered to be in an uptrend for that time frame. When it is below, the stock is generally in a downtrend. By measuring the share of stocks above their moving averages, you can see how much of the market is actually taking part in a trend, rather than relying only on the index level.

These metrics are calculated for two kinds of stock groups:

• Indices: all constituents of an index, such as the S&P 500 or the Nasdaq 100.
• Countries: all stocks listed in a given country's market.

In the formulas below, constituents means every stock in the selected index or country.

Why they matter to investors?

• They show how broad a trend is. If an index is rising and most of its stocks are above their moving averages, the uptrend is broad-based. If only a small share of stocks is above, a few large companies are driving the index.
• They cover different time horizons. The 20-day metric reflects short-term trends, the 50-day metric reflects medium-term trends, and the 200-day metric reflects long-term trends. Together, they show whether short-term moves agree with the bigger picture.
• They help identify market extremes. Very high readings suggest the market may be stretched and due for a pause. Very low readings suggest widespread selling that may be close to exhaustion.
• They allow comparisons across markets. The metrics are percentages, so you can directly compare indices or countries of any size.

Fields and formulas

Each metric compares a stock's current close with its simple moving average (SMA) for the period.

• Current close: the stock's latest closing price.
• SMA 20/50/200: the average of the stock's closing prices over the last N trading days.

The list of metrics:

• Above moving averages 20-day (%) = number of stocks with Current close > SMA20 / number of constituents × 100
• Above moving averages 50-day (%) = number of stocks with Current close > SMA50 / number of constituents × 100
• Above moving averages 200-day (%) = number of stocks with Current close > SMA200 / number of constituents × 100