Strong Breadth Indicates Future Gains

By on September 23, 2010

Quantifiable Edges postulates that the strong breadth experienced on Monday’s stock market breakout could portend future gains.

It is very rare to see a fresh breakout occur on such positive breadth as we saw Monday. In the past it has often led to a successful breakout.

A positive impact can be seen right away. And when looking out 4-5 weeks the risk/reward remains very favorable. The market is certainly very overbought and could pull back at any time. But this is one study suggesting there’s a good chance the current momentum begets more buying.

They include a chart showing the history and outcome after the SPX closes at a new high after not having done so for at least 10 days with NYSE up volume greater than 90%.

Source: Quantifiable Edges

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