In late 2023, the famous Breadth Thrust indicator flashed a bullish signal for the stock market. Since the Second World War, it has only happened a few times. But why is this important?
-What is the Breadth Thrust Indicator?
Developed by Marty Zweig, the Breadth Thrust is an indicator that analyzes the general momentum of the stock market to reveal the times when buyers begin to dominate the market. The indicator calculates the proportion of advancing/declining stocks and is widely known for its signal at the beginning of a new bull market.
Calculating the Zweig Breadth Thrust
Mr. Zweig created the indicator by tracking the proportion of Advancing/Declining stocks (AID ratio) over ten days. The indicator is based on the NYSE and focuses on instances when oversold market conditions are moving to extremely overbought in a short period.
The signal for the new bull market
When the Breadth Thrust indicator moves from below 40% to above 61.5% within 10 days, it indicates the beginning of a potential new bull market.
■ From below 40% to above 61.5% (within 10 days)
Formula
The Breadth Thrust is simply the 10-day moving average of the following formula:
■ (Advancing Stocks) / (Advancing + Declining stocks)
Read more: Marty Zweig & the Breadth Thrust Signal for the Stock Market