Market Breadth Collapses
When fewer than 40% of S&P 500 stocks are above their 200-day MA
When breadth narrows severely (fewer than 40% of S&P 500 constituents above their 200-day moving average), it historically signals either a broad market bottom or a warning that narrow leadership is unsustainable.
What history says
Editorial commentary written by ALAN analysts. Figures cited below are analyst-authored context — they are not derived from the chart above and may reflect different windows or sources.
When fewer than 40% of stocks are above their 200-day MA, the median forward 12-month return exceeds +15%. Broad pessimism creates opportunity.
When the index is making new highs but breadth is deteriorating, it signals that gains are concentrated in fewer names. This divergence has preceded corrections in 2000, 2007, and 2021.
When breadth expands from below 40% to above 80% within 10 trading days (a 'breadth thrust'), it has historically marked the beginning of a new bull market with zero exceptions.
When breadth washes out below 40%, check whether the decline has pushed your equity weight below its rebalancing band — historically these washouts have marked better moments to top back up to target than to cut exposure further.