The Zweig Breadth Thrust indicator is a technical analysis tool used by some investors to identify and track stock market trends. Developed by Investor’s Business Daily Trading columnist Mark Zweig, the indicator is used to detect when a stock’s price and volume are in a state of bout, but it may not be the most reliable indicator when it comes to predicting future stock market trends.
The Zweig Breadth Thrust indicator is calculated by taking a snapshot of the number of advancing issues and declining issues on the New York Stock Exchange (NYSE) and Nasdaq Composite as reported by the New York Stock Exchange. The indicator then subtracts the advancing issues from the declining issues and then multiplies the result by the sum of the volume of stocks traded on both exchanges over the past three weeks. If the result of this calculation is above a certain threshold, it is assumed that the stock market is in an uptrend; similarly, when the result is below a certain threshold, it is assumed that the stock market is in a downtrend.
Although the Zweig Breadth Thrust indicator can be helpful in identifying the direction in which the stock market is heading, it is not always an accurate indicator of future stock market performance. For example, the indicator does not account for changes in investor sentiment, which may cause stocks to move in the opposite direction of the Zweig Breadth Thrust indicator. Furthermore, it is possible for the indicator to be wrong in the short term due to economic news or other factors.
In addition, the Zweig Breadth Thrust indicator does not account for the quality of stocks. Although it may detect changes in the overall trend of the stock market, it does not necessarily provide a good indication of what stocks will perform well in the future. For this reason, it is important for investors to use other tools and indicators when making investment decisions.
Investors should be aware that the Zweig Breadth Thrust indicator is not a foolproof way to predict the stock market, and that it should be used in combination with other analysis tools to get a better idea of how the stock market is likely to perform. Furthermore, it is important for investors to keep an eye on economic news and other factors that may have an impact on their investments.