What Is Market Breadth?
Market breadth measures the degree of participation in a market move. It answers: "Is the rally broad-based or driven by a few stocks?" This topic carries 15% weight on CMT Level 1 and appears in intermarket analysis on Level 2.
For the full curriculum breakdown, visit the CMT exam guide 2026.
Key Breadth Indicators
Advance-Decline Line (AD Line)
The cumulative sum of (advancing issues − declining issues). When the AD Line diverges from the market index, it signals weakening breadth.
McClellan Oscillator
Based on the difference between 19-day and 39-day EMAs of net advances:
- Positive values: Bullish breadth
- Negative values: Bearish breadth
- Extreme readings (±100+): Overbought/oversold conditions
McClellan Summation Index
Cumulative sum of the McClellan Oscillator. Long-term breadth gauge:
- Above +1000: Strong bull market
- Below −1000: Strong bear market
Arms Index (TRIN)
TRIN = (Advancing Issues / Declining Issues) / (Advancing Volume / Declining Volume)
- Below 1.0: Bullish
- Above 1.0: Bearish
- Extreme readings: Contrarian reversal signals
New Highs / New Lows
The number of stocks making 52-week highs vs. lows. A healthy uptrend should show expanding new highs.
Breadth and Dow Theory
Market breadth directly relates to Dow Theory's concept of confirmation. When most stocks participate in a move, the trend is healthy. Narrowing breadth is an early warning of trend exhaustion.
Exam Application
| Indicator | Exam Focus | Level |
|---|---|---|
| AD Line | Divergence analysis | Level 1 |
| McClellan Oscillator | Calculation and signals | Level 1 & 2 |
| TRIN (Arms Index) | Interpretation | Level 1 |
| New Highs/Lows | Trend health assessment | Level 1 & 2 |
| Summation Index | Long-term analysis | Level 2 |
Continue your study with technical indicators and the complete CMT guide.
Advance-Decline Line vs. S&P 500
Divergence between AD Line and index warns of potential trend reversal