The breadth of the market indicator:
A)attempts to measure what a broad range of securities is doing as opposed to merely examining a market average.
B)can be used to analyze upturns in the market.
C)compares the advance-declines with the movement of a popular market average to determine if there is divergence between the two.
D)All of the above

Question

Quizplus · Accepted Answer

A breadth of the market indicator attempts to measure what a broad range of securities is doing as opposed to merely examining a market average. The theory is that market averages, such as the Dow Jones Industrial Average of 30 stocks or the Standard & Poor's 500 Stock Average, are weighted toward large firms and may not be representative of the entire market. The technician often compares the advance-declines with the movement of a popular market average to determine whether there is a divergence between the two. Advances and declines usually move in concert with the popular market averages but may move in the opposite direction at a market peak or bottom. One of the possible signals for the end of a bull market is when the Dow Jones Industrial Average is moving up, but the number of daily declines consistently exceeds the number of daily advances on the New York Stock Exchange. This indicates that conservative investors are investing in blue-chip stocks, but that there is a lack of broad-based confidence in the market.

The Breadth of the Market Indicator