Market breadth analysis is a key factor in determining the probability of a trend continuing. Much of what I try to do when evaluating market risk is to assess a probability of the market going up versus going down over my time horizon, which tends to be one to three months. I look at longer-term horizons, but the confidence factor is very different.

While there are many ways to look at how many stocks are participating in a rally, two that I like are the percentage of stocks above a long-term average (200-day) and the percentage of stocks making new 52-week highs or lows.

For most of 2017 - a very strong market - each new peak saw a large number of stocks participating in the rally. It peaked in January 2018, with well over 80 per cent of stocks trending above their own 200-day averages. The percentage of stocks making new 52-week highs was also very strong and increased for most of 2017. The peak in December and January saw more than 25 per cent of the index hitting new highs. 

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So far in 2018, each subsequent rally has seen relatively low readings compared to 2017.

This does not mean a top has been reached, nor does it mean investors should sell out their portfolios. However, it does mean the strength of the trend is weakening.

Last week the S&P 500 closed above 2800, which was only a few percentage points from its all-time high. But, there are fewer stocks leading the market higher and that is troubling.

For those using stops and trading the high-momentum stocks, I would suggest tightening up your stops. With cash now paying over 2 per cent, it has a higher yield than the S&P 500.

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