What is Markets Outlook?

Markets Outlook is based on market breadth, which is a means of measuring the strength of a trend in a stock market. It treats all stocks equally. Market breadth does not consider price weighting, capitalization weighting, or the magnitude of price movement. For example, “FANG” stocks (Facebook, Amazon, Netflix, and Google) have a total component weight of 5.58% in the S&P 500. The performance of these four stocks will contribute greatly to the overall performance of index, despite the possibility of many other stocks with smaller capitalizations performing in a differing manner. Thus, looking at marked breadth can provide a more accurate view of the overall market. The most common market breadth components are Advances, Declines, Unchanged, Total Issues, Up Volume, Down Volume, Total Volume, New Highs, and New Lows.

Our Markets Outlook includes 3 market breadth indicators:

McClellan Oscillator

The McClellan Oscillator is based on the smoothed difference between the number of advancing and declining issues in NYSE Composite. Developed by Sherman and Marian McClellan in 1969, the oscillator is computed using the Exponential Moving Average (EMA) of the daily ordinal difference of advancing issues (stocks which gained in value) from declining issues (stocks which fell in value) over 39 trading day and 19 trading day periods.

Overbought is a zone above 70. It usually indicates the continuation of the current bullish trend. The upward momentum is very strong. The investors can expect to see more strong upward moves. The market has not reached short-term new high yet. Meanwhile, if the reading turns down to the bearish zone, a sell signal will be generated.

Bullish is a zone from 20 to 70. Bullish condition usually suggests the market is healthy overall, and the upward momentum is relatively strong. The investors can better determine whether the bullish trend is accelerating or decelerating by comparing the readings of past days.

Neutral is a zone from -20 to 20. Neutral condition usually indicates market’s uncertainty or indecision. Both the selling pressure and buying momentum are not strong. The market needs more time to make a decision in the movement direction.

Bearish is a zone from -70 to -20. Bearish condition suggests the market is not healthy overall, and the strength of the bull is weak. The investors can better determine whether the bearish trend is accelerating or decelerating by comparing the readings of past days.

Oversold is a zone below -70. Oversold condition usually indicates the continuation of current bearish trend. The market is very unhealthy and the downward pressure is very heavy. The investors should be cautious of the market turmoil. Meanwhile, if the reading turns up and leaves the oversold zone, a buy signal will be generated.

Up-Down Volume Oscillator

The Up-Down Volume Oscillator is based on the smoothed difference between Up and Down Volumes in NYSE Composite. The oscillator is computed using the Exponential Moving Average (EMA) of the daily ordinal difference of up volume (volume of stocks which gained in value) from down volume (volume of stocks which fell in value) over 39 trading day and 19 trading day periods.

Overbought is a zone above 100. It usually indicates the continuation of the current bullish trend. The upward momentum is very strong. The investors can expect to see more strong upward moves. The market has not reached short-term new high yet. Meanwhile, if the reading turns down to the bearish zone, a sell signal will be generated.

Bullish is a zone from 25 to 100. Bullish condition usually suggests the market is healthy overall, and the upward momentum is relatively strong. The investors can better determine whether the bullish trend is accelerating or decelerating by comparing the readings of past days.

Neutral is a zone from -25 to 25. Neutral condition usually indicates market’s uncertainty or indecision. Both the selling pressure and buying momentum are not strong. The market needs more time to make a decision in the movement direction.

Bearish is a zone between -100 to -25. Bearish condition suggests the market is not healthy overall, and the strength of the bull is weak. The investors can better determine whether the bearish trend is accelerating or decelerating by comparing the readings of past days.

Oversold is a zone below -100. Oversold condition usually indicates the continuation of current bearish trend. The market is very unhealthy and the downward pressure is very heavy. The investors should be cautious of the market turmoil. Meanwhile, if the reading turns up and leaves the oversold zone, a buy signal will be generated.

New High-Low Oscillator

New High-Low Oscillator is based on the smoothed difference between the number of new highs and new lows in NYSE Composite. The oscillator is computed using the Exponential Moving Average (EMA) of the daily ordinal difference of new high issues (stocks which reached a 52 week new high) from new low issues (stocks which reached a 52 week new low) over 39 trading day and 19 trading day periods.

Overbought is a zone above 10. It usually indicates the continuation of the current bullish trend. The upward momentum is very strong. The investors can expect to see more strong upward moves. The market has not reached short-term new high yet. Meanwhile, if the reading turns down to the bearish zone, a sell signal will be generated.

Bullish is a zone from 0 to 10. Bullish condition usually suggests the market is healthy overall, and the upward momentum is relatively strong. The investors can better determine whether the bullish trend is accelerating or decelerating by comparing the readings of past days.

Bearish is a zone between -10 to 0. Bearish condition suggests the market is not healthy overall, and the strength of the bull is weak. The investors can better determine whether the bearish trend is accelerating or decelerating by comparing the readings of past days.

Oversold is a zone below below -10. Oversold condition usually indicates the continuation of current bearish trend. The market is very unhealthy and the downward pressure is very heavy. The investors should be cautious of the market turmoil. Meanwhile, if the reading turns up and leaves the oversold zone, a buy signal will be generated.

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