Most traders follow price. If the Nasdaq Composite ($NASX) is making new highs, the assumption is that the market must be strong. But as Barchart Senior Market Strategist John Rowland, CMT, explained in a recent webinar, the real story isn’t told by the absolute index level. It’s told by the stocks inside the index.
Market internals can expose whether a rally is broad and healthy… or narrow and vulnerable. And right now, that internal picture looks very different from the headline strength everyone is celebrating.
Why Breadth Matters More Than Most Traders Realize
Breadth measures how many stocks are actually participating in a move. When a market rises because thousands of stocks are moving up together, that’s real strength.
When an index rises because a few mega-caps are carrying the entire load, that’s a warning.
This is exactly what John illustrated by comparing the Nasdaq 52-Week High–Low Index ($MADQ) against the Nasdaq Composite ($NASX).
Since June, $MADQ showed expanding strength (i.e., more Nasdaq stocks breaking into new highs than new lows). But recently, that flipped. The index hit new all-time highs while breadth turned negative, meaning more components were falling than rising.
That divergence is often the market’s first quiet warning that momentum is weakening under the surface.
When Price and Breadth Stop Agreeing
A rising index with falling breadth has historically been an early cause for caution ahead of market reversals or volatility events. It doesn’t guarantee a decline tomorrow, but it does tell us the foundation of the trend is thinning.
For example, John highlighted the moment the Nasdaq printed fresh highs at the same time new lows expanded underneath. That’s the kind of internal fracture traders want to catch early, not after the fact.
Using Barchart’s Market Momentum Page to See “Under the Hood”
To bring this idea into real-world trading, John walked through Barchart’s Market Momentum page — a dashboard that shows:
- Advancing vs. declining issues
- Advancing vs. declining volume
- New 52-week highs and lows
- Percentage of stocks above key moving averages
These signals give you a daily read on market health. For example, when advancing stocks drop below declining stocks during a rally, or when 52-week lows spike despite bullish headlines, it often signals exhaustion building beneath the surface.
Extreme readings — such as 80–90% of the market advancing or declining — can also mark a capitulation in investor sentiment that precedes turning points.
This internal data helps traders anticipate shifts and position proactively, rather than react to them.
A Process for Reading the Market Before It Moves
Instead of trading off headlines or price alone, John encourages incorporating a simple rhythm:
- Start with the index trend
- Compare it to breadth (52-week highs/lows, advancers vs. decliners)
- Look for confirmation or divergence
- Check whether momentum is strengthening or fading
Price shows where the market is today. Breadth shows whether that move has real support behind it.
And when they disagree? Breadth usually wins.
The Takeaway
The Nasdaq’s rally looks strong on the surface, but breadth reveals a different picture. The number of stocks making new lows is rising. Participation is thinning. Internal weakness is creeping in even as indexes push higher.
This doesn’t mean the rally is over, but it does mean traders should be paying attention for potential volatility events or pullbacks.
You can analyze these signals yourself using Barchart’s Market Momentum page and the same breadth indicators John uses in his workflow. If you want an edge most traders ignore, this is where to start.
- Stream the full webinar on Hidden Market Signals
- Analyze breadth using the Stock Market Momentum page on Barchart
On the date of publication, Barchart Insights did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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