Percent Above Moving Average

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market_indicators:percent_above_ma [2019/06/24 19:38]
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market_indicators:percent_above_ma [2023/09/29 15:03] (current)
jayanthi [Conclusions]
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 ====== Percent Above Moving Average ====== ====== Percent Above Moving Average ======
  
-===== Introduction ​=====+===== Percentage of Stocks Above a Moving Average: Internal Market Strength or Weakness ​=====
  
-The percentage of stocks trading above a specific moving average is a breadth indicator that measures ​internal strength or weakness in the underlying index. The 50-day moving average is used for short-to-medium-term timeframes, while the 150-day and 200-day moving averages are used for medium-to-long-term timeframes. Signals can be derived from overbought/​oversold levels, crosses above/below 50% and bullish/​bearish divergences. The indicator is available for the Dow, Nasdaq, Nasdaq 100, NYSE, S&P 100, S&P 500 and S&P/TSX Composite. SharpCharts users can plot the percentage of stocks above their 50-day moving average, 150-day moving average or 200-day [[:​technical_indicators:​moving_averages|moving average]]. A full symbol list is provided at the end of this article.+When an index continues to move higher, it would be helpful to understand if there'​s internal strength behind that movement. ​The percentage of stocks trading above a specific moving average is a market ​breadth indicator that can measure the internal strength or weakness in an underlying index. ​
  
-===== Calculation ​===== +For short-to-medium-term timeframes, it's helpful to look at the percentage of stocks trading above the 50-day moving average. For medium-to-long-term-timeframes,​ it's best to look at the percentage of stocks trading above the 150-day and 200-day moving averages. You can get trading signals from crosses above/below 50%, overbought/​oversold levels, and bullish/​bearish divergences. The indicator is available for the Dow, Nasdaq, Nasdaq 100, NYSE, S&P 100, S&P 500, and S&P/TSX Composite. SharpCharts users can plot the percentage of stocks above their 50-day moving average, 150-day moving average or 200-day [[:​technical_indicators:​moving_averages|moving average]]. A full symbol list is provided at the end of this article. 
 + 
 +===== Calculating Percentage Above MA ===== 
  
 <​code>​ <​code>​
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-Nasdaq 100 example: 60/100 = .60 or 60% +Nasdaq 100 example: 60/100 = 0.60 or 60% 
-S&P 500 example: 80/500 = .16 or 16% +S&P 500 example: 80/500 = 0.16 or 16% 
-Dow Industrials example: 7/30 = .2333 or 23.33%+Dow Industrials example: 7/30 = 0.2333 or 23.33%
  
 </​code>​ </​code>​
  
-The calculation is straightforward: ​simply ​divide the number of stocks above their XX-day moving average by the total number of stocks in the underlying index. The Nasdaq 100 example shows 60 stocks above their 50-day moving average ​and 100 stocks in the index. The percent above their 50-day moving average equals 60%. As the chart below showsthese indicators fluctuate between 0% to 100%, with 50% as the center line. +The calculation is straightforward:​ divide the number of stocks above their XX-day moving average by the total number of stocks in the underlying index. The Nasdaq 100 example shows 60 stocks ​trading ​above their 50-day moving average. Since there are 100 stocks in the index, the percent above their 50-day moving average equals 60%. The chart below shows that these indicators fluctuate between 0% to 100%, with 50% as the center line. 
  
 {{:​market_indicators:​percent_above_ma:​pama-0-ndxexam.png|Percent Above SMA - Example}} {{:​market_indicators:​percent_above_ma:​pama-0-ndxexam.png|Percent Above SMA - Example}}
  
-===== Interpretation ​=====+===== What Does the Percentage of Stocks Above a Moving Average Tell You? =====
  
 This indicator measures the degree of participation. Breadth is strong when the majority of stocks in an index are trading above a specific moving average. Conversely, breadth is weak when the minority of stocks are trading above a specific moving average. There are at least three ways to use these indicators. First, chartists can obtain a general bias with the overall levels. A bullish bias is present when the indicator is above 50%. This means more than half the stocks in the index are above a particular moving average. A bearish bias is present when below 50%. Second, chartists can look for [[:​glossary_o#​overbought|overbought]] or oversold levels. These indicators are oscillators that fluctuate between zero and one hundred. With a defined range, chartists can look for overbought levels near the top of the range and oversold levels near the bottom of the range. Third, bullish and bearish divergences can foreshadow a trend change. A bullish divergence occurs when the underlying index moves to a new low and the indicator remains above its prior low. Relative strength in the indicator can sometimes foreshadow a bullish reversal in the index. Conversely, a bearish divergence forms when the underlying index records a higher high and the indicator remains below its prior high. This shows relative weakness in the indicator that can sometimes foreshadow a bearish reversal in the index. ​ This indicator measures the degree of participation. Breadth is strong when the majority of stocks in an index are trading above a specific moving average. Conversely, breadth is weak when the minority of stocks are trading above a specific moving average. There are at least three ways to use these indicators. First, chartists can obtain a general bias with the overall levels. A bullish bias is present when the indicator is above 50%. This means more than half the stocks in the index are above a particular moving average. A bearish bias is present when below 50%. Second, chartists can look for [[:​glossary_o#​overbought|overbought]] or oversold levels. These indicators are oscillators that fluctuate between zero and one hundred. With a defined range, chartists can look for overbought levels near the top of the range and oversold levels near the bottom of the range. Third, bullish and bearish divergences can foreshadow a trend change. A bullish divergence occurs when the underlying index moves to a new low and the indicator remains above its prior low. Relative strength in the indicator can sometimes foreshadow a bullish reversal in the index. Conversely, a bearish divergence forms when the underlying index records a higher high and the indicator remains below its prior high. This shows relative weakness in the indicator that can sometimes foreshadow a bearish reversal in the index. ​
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 {{:​market_indicators:​percent_above_ma:​pama-5-tsx50.png|Percent Above SMA - Chart 5}} {{:​market_indicators:​percent_above_ma:​pama-5-tsx50.png|Percent Above SMA - Chart 5}}
  
-===== Conclusions ​=====+===== The Bottom Line =====
  
-The percentage of stocks above a specific moving average is a breadth indicator that measures the degree of participation. Participation would be deemed relatively weak if the S&P 500 moved above its 50-day moving average and only 40% of stocks were above their 50-day moving average. Conversely, participation would be deemed strong if the S&P 500 moved above its 50-day moving average and 60% or more of its components were also above their 50-day moving average. In addition to absolute levels, chartists can analyze the directional movement of the indicator. Breadth is weakening when the indicator falls and strengthening when the indicator rises. A rising market and falling indicator would raise suspicions ​on underlying weakness. Similarly, a falling market and rising indicator ​would suggest underlying strength that could foreshadow a bullish reversal. As with all indicators, it is important to confirm or refute findings with other [[:​technical_indicators|indicators]] and analysis. ​+The percentage of stocks above a specific moving average is a breadth indicator that measures the degree of participation. Participation would be deemed relatively weak if the S&P 500 moved above its 50-day moving average and only 40% of stocks were above their 50-day moving average. Conversely, participation would be deemed strong if the S&P 500 moved above its 50-day moving average and 60% or more of its components were also above their 50-day moving average. In addition to absolute levels, chartists can analyze the directional movement of the indicator. Breadth is weakening when the indicator falls and strengthening when the indicator rises. A rising market and falling indicator would raise suspicions ​of underlying weakness. Similarly, a falling market and rising indicator suggest underlying strength that could foreshadow a bullish reversal. As with all indicators, it is important to confirm or refute findings with other [[:​technical_indicators|indicators]] and analysis. ​
  
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