Market breadth indicates whether a market rally or decline is widespread or concentrated in a few stocks.
How to Measure
- Advance/Decline ratio: stocks going up vs down
- New highs vs new lows: stocks hitting 52-week extremes
- % above 200-day MA: how many stocks are in uptrends
Why It Matters in Asia
- KOSPI breadth: if only Samsung rises but everything else falls, the 'rally' is fragile
- Nikkei breadth: price-weighted index can be misleading — 5 high-priced stocks can move the index while 200 stocks decline
- India breadth: small/mid caps often diverge from SENSEX (30 stocks)
Warning Sign
Narrowing breadth (fewer stocks participating in a rally) often precedes market tops. If an index hits new highs but advance/decline ratio is falling, be cautious.