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What Do Breadth Indicators Show Next for Asia?

by Mark Galasiewski
Updated: April 21, 2020

Hey everyone, Mark Galasiewski here. Technical analysis is most popular during financial crisis. One reason for that is because the sharp price declines in the market push many secondary indicators to record or near record extremes, extremes which typically haven't been seen in many years. If ever. Secondary indicators can be very useful because they give you a way of comparing the severity of the current crisis to past crises, which may give you a sense of how long the crisis will continue or even an indication that it has already passed. One popular secondary indicator is market breadth or the degree to which stocks participate in an uptrend or downtrend. A popular breath indicator is the percentage of index members trading above their 200 day moving average. If a large percentage of stocks in the index are trading well above their longterm trend, then it shows that the market uptrend is strong or perhaps even becoming overheated, and if a large percentage of stocks are trading below their longterm trend, then it shows you that the market downtrend is strong or perhaps even near its end.

In the April, 2020 issue of Global Market Perspective and Asian Pacific Financial Forecast, I published longterm breadth charts for eight major Asian Pacific markets and I'll share a couple of them with you now. The left chart shows the percentage of members in India's Nifty 50 index trading above their 200 day moving averages. I point out in the report that at the March, 2020 low in the Nifty, the breath indicator fell to zero and that the only other time that happened was October 27, 2008 the exact day of the bottom that year in the Nifty. The chart at right shows the percentage of members in South Korea's Kospi index that trade above their 200 day moving averages. I point out in the report that at the March, 2020 low in the Kospi the breadth indicator fell to a record low of 1.95% and that the previous record low of 2.75% also occurred on October 27, 2008 which marked the exact day of the bottom that year in the Kospi. The recent crisis in global stocks pushed many secondary indicators to record or near record extremes, and that information supports our wave counts for Asian Pacific stocks. We'll continue to watch various measures of stock market breadth and post any important updates in our monthly and end of day analysis.

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