View from the Observation Deck

1. One of the tools investors can use to help capture the tone of the stock market at any point in time is market breadth.
2. Market breadth tracks how many stocks are in positive territory, unchanged, or down over a given period of time.
3. The charts show the number of stocks in the S&P 500 that were up in a given calendar year (chart 1) since 1993 as well as the corresponding price-only return of the index (chart 2).
4. It is pretty clear that the performance of the S&P 500 improves when the number of stocks in positive territory rises.
5. From 1993-2011, the average number of issues up in a given year was 298. The highest total was 458 in 2003, while the lowest was 25 in 2008.
6. With respect to performance, the average price-only return over the same span was 7.7%. The best return was 34.1% in 1995, while the poorest showing was -38.5% in 2008.
7. Over the first seven months of 2012, the number of up issues totaled 346 (298 avg. since 1993), and the price-only return was 9.7% (7.7% avg. since 1993).