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1996issue C041-3

Constructing the four-input breadth-volume ratio

Four internals can be locked into one advance-decline-volume-ratio with an equilibrium-reading of 1. Editorial: treat the overbought-oversold question as a construction choice about whether the forecast lives on the raw print, a close-based moving-average, or an open-form-average whose hi-lo-index bands tighten toward that balance point.

  • Market-breadth can be built from advancing issues, declining issues, advancing volume, and declining volume rather than from a single issue's close or daily range.
  • The advance-decline-volume-ratio divides the advancing-to-declining issue count by the advancing-to-declining volume ratio, with an equilibrium-reading of 1 labeled bullish between 0 and 1 and bearish above 1.
  • On the raw daily scale, readings above 2.5 and below 0.5 are extreme warnings that can arrive early or keep extending, so they are not automatic reversal confirmations.
  • A moving-average of each day's close, or an open-form-average of the four inputs, makes hi-lo-index extremes rarer and pulls published bands closer to 1.
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HI/LO4 readingsCurrent trackMarket breadth120 readingsMoving average449 readings

Four internals instead of one close

A market-breadth construction can be built from four internals: advancing issues, declining issues, advancing volume, and declining volume. That path measures internal participation from many issues at once. It does not start from a single issue's close or daily range.

How the ratio is formed

The advance-decline-volume-ratio divides the advancing-to-declining issue count by the advancing-to-declining volume ratio.

A reading of 1 is defined as the equilibrium-reading. Values between 0 and 1 are labeled bullish. Values above 1 are labeled bearish.

The same four-input ratio can be sampled from minutes to months whenever the four internals are available for that horizon.

Raw prints and extreme warnings

The raw daily series is described as usually remaining between 0.4 and 2.5 and seldom exceeding 4, with one cited 1987 episode above 10.

On the raw scale, readings above 2.5 and below 0.5 are treated as extreme high and low warnings. Those warnings can arrive early or keep extending, so they are not automatic reversal confirmations.

Smoothing the daily close

A common next step is to smooth each day's close with a moving-average. About four to five days is used for short-term work, 20 to 23 days for intermediate work, and 50 to 90 days for a longer outlook.

Lengthening the moving-average makes extreme high and low readings rarer and pulls published guideposts closer to 1. Example bands are 0.7 and 1.25 on a four-day average, 0.85 and 1.10 on a 21-day average, and 0.9 and 1.05 on a 55-day average.

Averaging the inputs first

An open-form-average first averages advancing issues, declining issues, advancing volume, and declining volume over N days, then inserts those averages into the same ratio. That variant is presented as more damping than averaging the finished daily print when conditions are volatile.

High and low bands toward equilibrium

The hi-lo-index is the high and low extremes of the breadth-volume series, raw or smoothed. Those forecast bands become rarer and closer to 1 as the lookback lengthens.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
51 of 71 in the Market breadth track
19961-2 pp.Next on Market breadthConstructing the McClellan oscillator and a calibrated summation indexThe same oscillator construction can track momentum in price, volume, or advance-decline counts, and the usual market-breadth form starts from the daily advance-decline difference.
All readings on this track · 71 readings
  1. 1987How a failed rebound, weak breadth, and cycle dates broke the 1987 bull case
  2. 1988Diagnosing market bottoms with breadth, divergence and averages
  3. 1988Diagnosing index tops with breadth divergences
  4. 1988Record highs versus seven-day breadth and divergence
  5. 1989Constructing a percentage-scaled internals composite
  6. 1989Constructing a weekly block-tick breadth z-score
  7. 1989Constructing a dual-rate advance-decline oscillator
  8. 1989Normalize advance-decline series for a common-scale comparison
  9. 1990Unchanged-issue share as a narrow-breadth case study
  10. 1990Evaluating daily and weekly unsigned plurality breadth
  11. 1990Constructing paired new-high and new-low breadth indicators
  12. 1990Ten-day HI/LO extremes as a long-horizon breadth signal
  13. 1990Confirming index cycles with breadth, volume, and waves
  14. 1990Index cycle gates from breadth and volume
  15. 1990Constructing advance-decline breadth indicators
  16. 1990Weekly advance-decline oscillator: weight map, extremes, and spike cycle
  17. 1990Price-weighted construction distorts breadth, support, and trend
  18. 1991A peak-sequence test from the new-highs-to-advances-ratio
  19. 1991Fuzzy rules that turn daily market-breadth into a session consensus
  20. 1991From daily breadth tallies to a weighted consensus signal
  21. 1991Retesting market-breadth when market structure changes
  22. 1991Constructing TRIN as a breadth-volume ratio
  23. 1991Build the market clock before you read a price bar
  24. 1991A construction audit of the long-horizon trading index
  25. 1991Independent formula timers kept as a testable combination
  26. 1992When identical TRIN prints come from different pairings
  27. 1992Grade closing tick before a next-session breadth hypothesis
  28. 1992Noncumulative advance-decline swing confirmation
  29. 1992Five-day sum construction of the trading index
  30. 1992Daily closing-trin extremes and next-day direction
  31. 1992A three-layer audit: regime, breadth, and group RSI
  32. 1992Constructing a nine-state trend, momentum, and breadth score
  33. 1993Constructing a market-volume-impact rating from nested averages
  34. 1993When advance-decline confirmation counts the wrong universe
  35. 1993Constructing breadth momentum from advance-decline smoothing
  36. 1993Constructing a cumulative market-thrust line
  37. 1994Three-horizon construction of the Haurlan index
  38. 1994Checklist-gated session entry in 1993 index futures
  39. 1994Read one advance-decline pair through three windows
  40. 1994Constructing calibrated market-breadth summation indexes
  41. 1994Constructing a two-speed advance-decline oscillator and a calibrated summation
  42. 1995NYSE tick extremes and candlestick reversal entries
  43. 1995Assembling range, breadth, and a stored stop into one procedure
  44. 1995Restating market breadth timing rules as ratios
  45. 1995Constructing breadth ratio gates after lookback drawdowns
  46. 1995Building a short-range breadth and price oscillator
  47. 1996Constructing a smoothed advance-decline trend filter
  48. 1996Smoothed advance-decline alerts at the 1987 and 1990 turning points
  49. 1996Constructing breadth, RSI, and stochastic range filters
  50. 1996New-high and new-low counts as a breadth construction
  51. 1996Constructing the four-input breadth-volume ratio
  52. 1996Constructing the McClellan oscillator and a calibrated summation index
  53. 1996Declare the oscillator seed, then calibrate only the summation index
  54. 1997Three-gate centered strength in market-breadth construction
  55. 1997Daily advance-decline and new-high new-low breadth signals
  56. 1999Index-fund positions as a majority-vote committee
  57. 2000Tick, tiki and TRIN as a three-layer session confirmation stack
  58. 2000Constructing an advance-decline oscillator from one listed tape
  59. 2001Market breadth, beta, and volume-price confirmation
  60. 2001Regime context from relative venue volume, breadth, and intermarket spreads
  61. 2002When NYSE breadth misreads operating-stock participation
  62. 2003Two-gate breadth divergence and a trend filter for rally tops
  63. 2003Market internals confirm or diverge from the index
  64. 2004Constructing the McClellan oscillator and summation index
  65. 2005Intraday index-futures divergence as a three-part session hypothesis
  66. 2005Breadth summation levels as a short-term signal filter
  67. 2005Checking trend versus range with breadth and divergence
  68. 2011Constructing a Nasdaq hi-lo index from highs, lows, and issues traded
  69. 2013Cumulative advance-decline versus a one-year average
  70. 2013A one-year breadth average as a participation gate
  71. 2015Falsifying a healthy correction with breadth and support
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