Market breadth measures the internal condition of a market by asking: how many individual stocks are moving in the same direction as the index? A rising index driven by most of its component stocks is a healthier move than one propped up by a handful of large-cap names while the majority of stocks decline.
When breadth is strong — most stocks advancing, most sectors participating — a market rally has a broad foundation. When breadth deteriorates while the index holds near highs, it suggests that the rally is narrowing and becoming fragile. This divergence between breadth and price is one of the more reliable leading signals available to timing analysts.
Breadth is measured through several tools: the Advance-Decline Line (the most common), the percentage of stocks above their 200-day moving average, the number of new 52-week highs versus lows, and the McClellan Oscillator. None are precise timing signals on their own, but breadth deterioration has historically preceded major market peaks by weeks to months, making it a useful early warning layer in a systematic model.