Objective market analysis is an important tool used by successful investors. Analyzing a market from a broad perspective gives an investor insight into the strength and weaknesses of the market, and how it might impact their investment decisions. One such tool is the Standard & Poor’s 1500 (SP-1500) Zweig Breadth Thrust, which measures the breadth of market participation and helps identify trends and potential opportunities.
The SP-1500 Zweig Breadth Thrust is a smoothed market breadth indicator that was developed by Dr. Martin Zweig in the early 1980s. The indicator measures the breadth of participation in the market by gauging the number of stocks making new highs and lows on a given day. This measurement is compared to the previous day and plotted on a graph to generate a market breadth indicator.
The indicator is divided into two components – breadth thrust and momentum – which are then used to identify different types of market conditions. The breadth thrust measures the intensity of the market and reflects the number of stocks advancing and declining on a given day. The momentum component of the indicator reflects the trend of the market, which can either be up, down, or sideways. Based on the level of advance and decline activity of the market, investors can determine if the market is strong or weak.
The SP-1500 Zweig Breadth Thrust is a useful tool for identifying short term trends and potential opportunities. A reading above 75 indicates a strong bull market, while readings below 25 indicate a weak bear market. When the indicator is closer to 50, it means a neutral market with no strong bullish or bearish sentiment. In addition, the indicator can indicate when the market is overextended and could potentially reverse soon.
In conclusion, the SP-1500 Zweig Breadth Thrust is a valuable market breadth indicator that can help investors identify market trends, strength, and potential opportunities. Knowing when the market is overextended or weak can inform investment decisions and help investors make informed choices when investing in the stock market.