Market Breadth

The headline said that the market was up 1% today. But...what does that really mean? Was every stock up 1%? No. What if only tech stocks, which comprise 20% of the market caps of the S&P 500 (the market, in this sense), were up 5%? Well, that would imply that the rest of the market was net flat.

The breadth figures matter a lot, because they reflect overall sentiment in the market as a whole, not just one stock or one group or one entity. If the market is broadly...up, then maybe global interest rates went down...or peace broke out everywhere...or nervous investors just decided to collectively jump in, turning their safe cash into relatively risky equity investment.

And the notion of a market being liquid means that there's a lot of volume in it...usually a good sign for investors. Lots of volume usually implies lots of "new" money coming into the system, with sentiment getting better from those cash hoarders who have previously been sitting on the sidelines doing a whole lot of...nothing.

See: Thin Market. See: Liquid Market.