Market Breadth - advance/decline and new highs/lows

What breadth measures

Indices like Nifty 50 are weighted by free-float market cap. A 5% move in Reliance moves the index more than a 5% move in twenty smaller names combined. Breadth corrects for this by counting stocks, not weights.

The two breadth questions:

• Advance/decline ratio — how many stocks went up today vs how many went down?
• New highs vs new lows — how many stocks made fresh 52-week highs today vs fresh 52-week lows?

Reading advance/decline

The A/D ratio is the count of advancers divided by the count of decliners on a given day. Rough readings:

• >1.5 — broad-based rally
• 1.0–1.5 — modest positive breadth
• 0.8–1.0 — modest negative breadth
• <0.5 — broad-based decline

The most informative use is to compare A/D against the index move. If Nifty rallies 1% but A/D is 0.7, the rally is narrow — a few large names dragged the index up while most stocks fell. That's lower-quality than a 1% Nifty rally with A/D at 1.8 (broad-based).

Narrow rallies are common at market tops; broad rallies often mark healthy uptrends.

Reading new highs vs new lows

New 52-week highs and lows on a given day. The ratio matters:

• More highs than lows — broad strength
• More lows than highs — broad weakness
• Sharp shift in the ratio — regime change

A market making fewer new highs even as the index rises is showing internal weakness. A market making more new highs even as the index dips is showing internal strength. Either pattern signals a likely directional change.

What breadth doesn't tell you

Breadth is a market-state indicator, not a stock-picking tool. A bullish-breadth day doesn't mean any specific stock is interesting. Conversely, a bearish-breadth day might still contain interesting bullish setups in resilient sectors.

Use breadth as context for conviction reads: a bullish-stance stock on a bullish-breadth day is more reliable than the same stock on a bearish-breadth day, because the broader market is also flowing in the same direction.

Breadth in conviction scoring

Market breadth is a context factor in the conviction engine. It confirms a bullish stance when A/D ≥1.2; bearish when ≤0.8. It doesn't create stance on its own — a bullish-breadth day doesn't make weak stocks bullish.