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BREADTH THRUST
Overview
The Breadth Thrust indicator is a market momentum indicator. It was developed by Dr.
Martin Zweig. The Breadth Thrust is calculated by dividing a 10-day exponential moving
average of the number of advancing issues, by the number of advancing plus declining
issues.
Interpretation
A "Breadth Thrust" occurs when, during a 10-day period, the Breadth Thrust indicator rises
from below 40% to above 61.5%. A "Thrust" indicates that the stock market has rapidly
changed from an oversold condition to one of strength, but has not yet become
overbought.
According to Dr. Zweig, there have only been fourteen Breadth Thrusts since 1945. The
average gain following these fourteen Thrusts was 24.6% in an average time-frame of eleven
months. Dr. Zweig also points out that most bull markets begin with a Breadth Thrust.
Example
The following chart shows the S&P 500 and the
Breadth Thrust indicator.
Horizontal lines are drawn on the Breadth Thrust indicator at
40.0% and 61.5%. Remember that a Thrust occurs when the indicator moves from below 40% to
above 61.5% during a 10 day period.
On December 18, 1984, I wrote the following comment regarding the Breadth Thrust
indicator in a software manual:
"At the time this discussion on the Breadth Thrust is being written (12/18/84), the
NYSE has gained only 1.6% since the 'Thrust.' If the market fails to go higher in the next
six to twelve months, it will be the first false signal generated by the Breadth Thrust
indicator in 39 years! With historical average gains of almost 25%, we feel the odds are
in our favor when we go with the Thrust."
As shown in the example, the NYSE did in fact go higher in the ensuing months. Twelve
months after the Thrust occurred the NYSE was up 21.6%. Twenty-one months after the Thrust
occurred, the NYSE was up a whopping 51%. Trust the next thrust...
Calculation
The Breadth Thrust is a 10-day simple moving average of the following:
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