So because Dow Jones is price weighted , if say the 10 highest priced the boutique s are up big , it can be positive, even if remaining 20 stocks are down for the day. Market Breadth simply tells you how many stocks are going up, how many going down, and how many are unchanged. Market breadth tells you how many stocks are participating in the move. By contrast a bear market is one where prices are dropping. Unlike that developing markets and frontier markets have average daily moves of 4% plus So in a market where the daily moves are below 1%, if it makes say 2% move that is significant (that is the concept behind IBD distribution and accumulation days where they look for 1.5% plus day on high volume). It Plots the breadth of number of stocks up 25% in 65 days in the bottom two panes. Say if you use just advancing , declining, and unchanged issues to look at breadth on a daily basis, a stock going up or down 1 cent also gets represented in the data. Same way if you use up volume and down volume , even a stock trading single share more than yesterday gets reflected in the data.
Primarily breadth is calculated by tracking advance decline and/ or new high new low and/or advancing volume and declining volume. The Market Monitor is a breadth based risk management and market timing tool that I have been using for last 10 years. Different people have massaged this data in various ways by using variety of mathematical techniques like moving average, exponential moving average, ratio analysis, standard deviation and so on to develop number of breadth based indicators. All market breadth based commonly available indicators in the market are derived using this basic data. Now the tool is used by number of trading bloggers (if you do search for stockbee Market Monitor you will see lot of them using this tool ) you and many of them have done further refinement to the concept. So stockbee Market Monitor uses only certain magnitude moves for calculating breadth. stockbee Market Monitor uses minimum liquidity to calculate breadth.