Index Breadth Percent of Stocks above Key Moving Averages

The Index Breadth Percent of Stocks above Key Moving Averages indicator tracks the percentage of stocks within a specific index or sector trading above their key moving averages to identify internal market strength and overextended conditions. By monitoring these breadth metrics, traders can effectively determine when a market is reaching overbought (Greed) or oversold (Fear) levels relative to its historical participation.

Usage

The Usage section describes how the script can be used to gauge market sentiment through breadth analysis. Users can select from a wide range of indices including the S&P 500, Nasdaq 100, and Dow Jones Industrial Average, as well as specific S&P 500 sectors like Financials, Energy, or Technology.

Traders typically use this tool to find extremes in market participation:

• Greed Zone: When the percentage of stocks above a selected moving average (e.g., the 200-day DMA) exceeds the Greed Level (default 80%), it suggests the market may be overextended and due for a consolidation or pullback.
• Fear Zone: When the percentage drops below the Fear Level (default 20%), it indicates a lack of participation and potential capitulation, often signaling a buying opportunity or a market bottom.
• Divergence: If the price of an index is making new highs while the percentage of stocks above a key moving average is declining, it suggests weakening internal support for the trend.

Details

The script utilizes the request.security function to fetch breadth data for various market tickers. Each combination of market index and Daily Moving Average (DMA) corresponds to a specific internal breadth ticker. For example, selecting the S&P 500 with a 50-day DMA pulls data for "S5FI", while the 200-day DMA pulls "S5TH".

The indicator supports five standard moving average lookbacks: 20, 50, 100, 150, and 200 days. Shorter lookbacks (20, 50) are more sensitive and useful for short-term swing trading, while longer lookbacks (150, 200) are better suited for identifying major cyclical tops and bottoms.

Settings

• Select Market: Choose the specific index or S&P 500 sector to analyze (e.g., Overall Market, Nasdaq, Russell 2000, SP500 Energy).
• Select DMA: Set the moving average period (20, 50, 100, 150, or 200) used to calculate the percentage of stocks trading above their average.
• Select Greed Level: Define the upper threshold (default 80) that signifies an overbought or "Greed" state.
• Select Fear Level: Define the lower threshold (default 20) that signifies an oversold or "Fear" state.

FAQ

How do I interpret the colored zones on the chart? The green highlighted areas represent the "Fear Zone" (below the fear level), indicating high potential for a reversal upward. Red highlighted areas represent the "Greed Zone" (above the greed level), indicating potential exhaustion.

Can I set alerts for specific market conditions? Yes, the script includes built-in alert conditions that trigger when the breadth line enters or exits the defined Greed and Fear zones.

How do I access the Index Breadth Percent of Stocks above Key Moving Averages indicator? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.