How To Deal With Bad Breadth
Now more than ever, there is always a lot of mention of “bad breadth.” This is when the indices traded or are holding up a lot better than the majority of individual common stocks.
For example yesterday I tweeted that it was an interesting day, the major indices were up, the small caps barely down but yet we had more declining issues than advancing issues, we had more 1 and 3-month new lows than new highs. We also had more stocks down 4% or more for the day than up 4% or more.
CLICK TO ENLARGE
But yet the indices masked what was happening underneath the surface by closing green for the day. This is going on quite often. Here are my thoughts on it;
- Negative divergences are not a great timing tool, positive divergences are.
- One has to keep an open mind to the fact that the lagging stocks can catch up to the indices and negate the negative divergence.
- More importantly above else, it reiterates why you should own the index ETF’s as core positions, YOU WILL NEVER FEEL LEFT OUT.
Persistent negative breadth will eventually catch up to the indices, however, more often than not you have to give the benefit of the doubt to the bulls.
Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at email@example.com or 646-480-7463.
We live in a world in which we are bombarded with information, tweets, blogs, etc., content is the new salesman, content is the new marketing, content is the new networking. With information being so readily available, bloggers try to differentiate themselves with their writing skills, volume, and consistency, putting out blog posts to meet quotas. We are seeking to stand out from the crowd by showing performance, by taking all the information and seeking alpha, that’s the sole purpose of the blog. It won’t always be pretty; it’s never easy, and performance is spotty, but we seek superior risk-adjusted returns, not notoriety for our writing skills. If this is something you can relate to, then this blog is for you.