Zweig Breadth Study: are bottom-levels reached

In this week’s update I wanted to take an in-depth look at Zweig Breadth (ZB), especially since it dropped below 0.20 on Friday; a rather extreme reading. Question is if such low levels coincide with important market bottoms or not? The chart below shows all the occasions ZB dropped below 0.20 and where price was at that same time.

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ZB

From the chart it follows that ZB can drop below 0.20 without hitting an important price-bottom simultaneously. Instead often price continued down after a few side-ways-up days (b-waves), setting up positive divergence between ZB and price (price lower, but ZB higher, red lines). Then the market started to rally. Over the past 2 years, ZB dropped below 0.20 twenty (20) times, excluding Friday’s reading. Out of those 20 occasions, in three (3) times an immediate bottom was in. Hence, odds suggest that we should expect a lower price low first in the days to come, after a bounce, which will set up the higher ZB reading. Regardless, in all occasions lower prices were hit within days of a reading <0.20, and the market -in this case the NYA- rallied strongly to new ATHs.

In addition, I also wanted to show the A/D line (see chart below). It has continued to make higher highs and therefore shows no negative divergence with price. Although not necessary, but unless and until we see negative divergence show up: less and less stocks are participating in the uptrend; should we, IMHO, get more concerned about the bigger-picture uptrend.

CLICK CHART TO ENLARGE

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3 thoughts on “Zweig Breadth Study: are bottom-levels reached

  1. Pingback: Market update: upside continues as was predicted already almost two months ago. | Intelligent Investing

  2. Just discovered your blog from reading the comments over at Tony Caldaro’s OEW site. I’ve never heard of the Zweig Breadth before and now I see the importance of it. Thanks for posting! I’ll be following your site regularly now.

    • Hi Mark! Thanks, and you’re welcome. There’s lots to discover about the market then just price only. Enjoy!!! Don’t hesitate to become a member and get a lot more inside information.

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