You Can't Swim if You Don't Know Where the River Flows
The 6 breadth indicators behind our daily ImGeld Market Breath posts—learn to read the market's true direction before diving into your next trade.
If you’ve ever wondered how professional traders read the market’s “pulse,” these six indicators are your answer. Today, we’re breaking down the tools experts use to understand the health and direction of the stock market, with a special focus on the breadth and sentiment of the NYSE where you’ll find a rich universe of small and mid-cap companies beyond just the mega-cap names.
These are the exact indicators we track daily in our ImGeld Market Breath posts. Understanding what each one measures will help you make more informed investment decisions and better interpret our daily market analysis.
McClellan Indicator (McClellan Oscillator)
The McClellan Oscillator is like a momentum detector for the market. Developed by Sherman and Marian McClellan in 1969, this indicator measures the difference between advancing and declining stocks on the New York Stock Exchange.
How does it work? It calculates the difference between two exponential moving averages of daily advances and declines.
What does it tell us?
Positive values indicate a bullish market (more stocks rising than falling)
Negative values signal a bearish market
Extreme readings can indicate overbought or oversold conditions
Key Levels (McClellan Summation Index):
Above +500: Strong broad momentum
Between 0 and +500: Moderate strength
Below 0: Potential structural breakdown
Note: The McClellan Summation Index is the cumulative total of the McClellan Oscillator, providing a longer-term view of market momentum.
NYAD (New York Advance-Decline)
The Advance-Decline line is one of the oldest and most respected market breadth indicators. It’s surprisingly simple yet powerful.
What does it measure? The cumulative difference between the number of advancing and declining stocks on the NYSE each day.
Why is it important?
Confirms the strength of market trends
Can show divergences that anticipate trend changes
Reflects actual market participation, not just major indices
Warning signal: If the NYSE index is making new highs but the NYAD line doesn’t confirm them, this is called a “bearish divergence” and can be a warning that the rally is losing steam.
Key Levels:
Above 0: Broad participation
Between -1000 and 0: Mixed or narrowing participation
Below -1000: Widespread selling pressure
NYHGH (52-Week Highs)
This indicator counts how many stocks on the NYSE are hitting their 52-week highs.
What does it reveal?
The breadth of market strength
Whether the rally is robust (many stocks participating) or limited (only a few)
The level of investor confidence
Key Levels:
Above 300: Strong leadership expansion
Between 100 and 300: Moderate leadership
Below 100: Lack of relevant new highs
NYLOW (52-Week Lows)
The counterpoint to the previous one: it counts how many stocks are at their 52-week lows.
What’s it used for?
Identifies periods of extreme selling pressure
Can signal buying opportunities at capitulation points
Helps assess the level of panic in the market
Key Levels:
Below 40: Stress easing
Between 40 and 100: Neutral range
Above 100: Heavy hidden selling pressure
VIX (Volatility Index)
Known as the “fear index,” the VIX is probably the most famous sentiment indicator in the world.
What exactly is it? It measures the implied volatility expected in the S&P 500 over the next 30 days, based on options prices. While the VIX tracks large-cap volatility, it’s an important sentiment gauge for all market participants, including those focused on smaller NYSE-listed companies.
Key Levels:
Below 15: Complacency
Between 15 and 20: Neutral volatility
Above 20: Heightened risk
The VIX paradox: When the VIX is extremely high, it’s often a signal that we’re near a market bottom. Experienced traders buy when fear is at its peak.
RVX (Russell 2000 Volatility Index)
The RVX is particularly valuable for investors focused on smaller companies. It measures the expected volatility of the Russell 2000, the small-cap index.
Why is it important for small-cap investors?
Small companies are more sensitive to economic conditions
They tend to be more volatile than large caps
They can anticipate movements in the broader market
This is YOUR space if you’re targeting smaller NYSE-listed companies
Strategic comparison for small-cap investors:
If RVX > VIX: Small caps are more nervous (typical during economic uncertainty) - pay extra attention
If VIX > RVX: Large caps show more stress (uncommon) - potential opportunity in smaller companies
Rising RVX with stable VIX: Small-cap specific concerns
Key Levels:
Below 20: Calm sentiment
Between 20 and 25: Neutral
Above 25: Elevated fear in small-cap space
How to Use These Indicators Together
The magic isn’t in using a single indicator, but in combining them to get the complete picture:
Confirm trends: Use McClellan and NYAD to verify that the index movement is legitimate
Assess strength: Compare NYHGH vs NYLOW to understand market breadth
Measure sentiment: VIX and RVX tell you whether fear or greed dominates
Look for divergences: When indicators disagree with major indices, pay attention
Final Thoughts
These indicators aren’t crystal balls—no tool will tell you with certainty what the market will do tomorrow. But together they form a powerful dashboard that helps you understand market context and make more informed decisions, especially when hunting for opportunities among smaller NYSE-listed companies.
This is exactly what we monitor in our daily ImGeld Market Breath posts - giving you a clear snapshot of market health every single day. Now that you understand what each indicator means, you’ll be able to interpret our daily updates with much more context and insight.
Next time you hear “the market was up today,” you’ll be able to ask the more important questions: But were most NYSE stocks up? Are smaller companies participating? Are there new highs across the broader market? What does the RVX say about small-cap sentiment?
Those deeper questions are what separate informed investors from those who simply follow large-cap index headlines. When you’re focused on smaller companies, understanding market breadth and sentiment is even more critical than watching mega-cap movements.