Global stock markets – positive breadth

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In order to measure stock market breadth, I find it very useful to monitor the percentage of stocks in the S&P 500 Index (or on the Nasdaq or New York Stock Exchanges) trading above their 50- and 200-day moving averages. These measures serve as yardsticks of the direction of the secondary and primary trends of the broad market.

In the same way as one applies this methodology to the constituents of a specific index or stock exchange, one can also consider the percentage of country indices trading above their respective averages. I am somewhat restricted as far as with data are concerned, but have managed to include 26 mature markets and 23 emerging markets in the research sample.

The chart below shows the percentage of countries in the overall group trading above their 50- and 200-day lines respectively. Interestingly, the majority of the markets (87%) are trading above the 200-day average – an indicator of a bullish primary trend. As far as the secondary trend is concerned, 68% of the countries are still trading above the 50-day average, having corrected from an overbought level of 100% a few weeks ago.

Click on the images below for larger graphs.

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When considering developed and emerging markets separately, similar patterns emerge, although a larger component of developing markets (95%) is in primary bull markets (see charts for emerging markets below).

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In short, based on the 200-day indicator global stock markets in general are trading in bullish territory, but the 50-day indicator signals that the secondary correction might not have played itself out fully yet. However, as always, one should be careful to base decisions on a single tool.

I am about to catch a plane to Europe, but will do more work to refine these indicators upon my return.

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