Intermediate Term Trading Systems Using Breadth

July 7, 2011

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While some of these measures may indicator very short term tops, over the intermediate term (weeks to months), thrusts in breadth tend to be bullish. Wayne Whaley has done some good work in in this area. Below is courtesy of Mark Boucher’s book “Trade Like a Hedge Fund.”

Five-Day Moving Average of Advancing Volume over five-Day Moving Average of Total Volume. Here you are simply taking the five-day moving average of advancing volume and dividing it by the five-day moving average of total volume. Whenever the five-day moving average of advancing volume is 77 percent or more of the five-day moving average of total volume, an extremely strong breadth situation is developing into a very strong buy signal. Three months later, the S&P is up at an average annual rate of 25.3 percent—this is the time to get aggressively long (see System Spreadsheet 4.2).

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Eleven-Day A/D Ratio. Simply take the 11-day moving average of advances and divide it by the 11-day moving average of declines (see System Spreadsheet 4.3). This gets bullish on moves

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