Constructing a percentage-scaled internals composite

Scale three internals to percent of their own bases

A breadth-composite is an accumulated series built from same-day percentage internals rather than from a price-weighted market average. The construction converts net advances minus declines, net up minus down volume, and net new highs minus new lows into percentages of their own bases, sums those percentages into a same-day algebraic-net, and accumulates that net.

Each internal is expressed as a percent of its own total so that issue counts, share volume, and new-high and new-low counts cannot dominate the composite through raw scale.

Accumulate the algebraic net

The three percentage terms are advance-decline-percent, volume-percent, and high-low-percent. They are defined as net advances over total issues, net advancing volume over total volume, and net new highs over total issues, each multiplied by 100. The algebraic-net is the same-day sum of those three terms, and that sum is added to the prior composite value.

Only the relative path of the accumulated series is used. The starting level may be set for convenience. Weekly inputs may replace daily inputs if less path sensitivity is acceptable.

Adjust lopsided dividend-capture volume first

A lopsided dividend-capture-volume burst should be adjusted before the volume-percent term is computed. An even split cancels because that term is already a share of total volume.

Compare the accumulated path with a headline average

After the October 1987 break, a 0-100 normalized overlay showed the breadth-composite and an exchange headline average keeping similar shape after their levels separated. The volume-percent sub-series was the component holding the composite up against a declining advance-decline-percent sub-series.

In the documented window, the September-December 1987 decline retraced 55% of the July 1986-August 1987 rise on the composite versus 117% on the exchange headline average. By the end of June 1988 the composite had recovered 91% of that decline versus 47% for the headline average.

Copy support and resistance as a parallel channel

A parallel-channel on the composite is drawn by connecting two highs or two lows, copying that line through the intervening extreme, and extending both lines. The same geometry on the exchange headline average over the same span left the December 4, 1987 low below the copied support and broke the up-channel on a one-day plunge that stayed inside the composite channel.

Read a split as price-breadth divergence

Price-breadth-divergence is read as a split between the composite and a price average, then checked against the later price path. The historical workflow marked such splits versus both an industrial average and an exchange headline average.