An almost Zweig Breadth Thrust buy signal

Mid-week market update: The market almost flashed a Zweig Breadth Thrust buy signal this week, though there is some dispute over the calculations. As a reminder, a ZBT buy signal is triggered when the market rises from oversold to overbought within 10 trading days. According to StockCharts, the market never reached the oversold condition on August 2, the day of the market panic, but did become overbought on Monday, which was exactly 10 trading days later.

 

However, Ryan Detrick observed that there is a considerable difference in advancing and declining stocks on August 2 between StockCharts and NDR. According to NDR, the ZBT buy signal was triggered on Monday. Ed Clissold of NDR admitted that data issues may cloud the picture. The use of all securities traded, common stock only, or a "transaction only" dataset could account for the difference.

In the interests of conservatism, I will call it a near miss, but the market action can still be characterized a a breadth thrust, just not a ZBT. Generally speaking, breadth thrusts are characterized by strong price momentum that persist for months. Though the market often pauses to take a breather after the initial buy signal. The accompanying chart shows eight instances when both the ZBT Indicator and the NYSE McClellan Oscillator were overbought. Six (pink) of the eight saw the market pause afterwards.

 

In the absence of major macro news, this week's stock market action can be described dominated by technicals and waiting for Fed Chair Powell's Jackson Hole speech scheduled Friday.

The full post can be found here.