Calculating breadth.
Breadth calculation for any group of securities is not rocket science ! (In other words, there is no 'confidential' algorithm involved.) One can do it at home.
Say if I have a group of securities - MSFT, CSCO, DELL and YHOO and I want to perform a simple breadth calculation on this, then all I need is nothing more than the prices (open/high/low/close) and volume for each of these securities.
- If say on 01-APR, each of these stocks go up,
then the number of advancing issues = 4 and number of declining issues = 0 and number of unchanged issues = 0.
- If say on 02-APR, YHOO, DELL, and CSCO go up, but MSFT goes down,
then the number of advancing issues = 3 and number of declining issues = 1 and number of unchanged issues = 0.
- If say on 03-APR, MSFT goes up, DELL stays unchanged and YHOO and CSCO go down,
then the number of advancing issues = 1, and number of declining issues = 2 and number of unchanged issues = 1.
...
...
- If say on 01-MAY, YHOO sets a new 52 week high, and none of the others set either new 52 week high or low,
then the new highs = 1 and new lows = 0.
- If say on 02-MAY, none of them set a new 52 week high or low,
then the new highs = 0 and new lows = 0.
- If say on 03-MAY, MSFT sets a new 52 week low, and none of the others set either new 52 week high or low,
then the new highs = 0 and new lows = 1.
...
...
(Calculation for Up Volume and Down Volume is similar to that for Advancing Issues and Declining Issues. Total Volume is of course very obvious.) That's all there is to it ! What holds for a group of securities that has 4 stocks in at, such as what we considered here, holds for a group of stocks that has 30 (DJIA), 100 (Nasdaq 100) or 500 (S&P 500) or even 2000 (Russell 2000) stocks in it. Or same may be applied to any ETF/Mutual-Fund for which one knows its components.
The calculation of direction/divergence (Disha/DigBheda - Sanskrit words) of course is different. This calculation has nothing to do with breadth.
One can do direction/divergence for anything. (Say direction of attacks on Occupation Forces in Iraq (increasing/decreasing) vs Direction of Casulaties of Occupation Forces in Iraq (increasing/decreasing), and the divergence between them. This divergecne will give the effectiveness of the attackers in causing csualities.)
I've found that direction/divergence calculation gives even more of actionable intelligence than just the breadth calcuation alone.
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