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Some Statistics on Extraordinary Breadth (Preview)

By Lawrence G. McMillan

Last Friday (January 18th) the “stocks only” breadth oscillator stood at +854.04 – the fourth highest reading of all-time. This is extremely overbought, but is not a sell signal (“overbought does not mean sell”). In fact, in the past, extremely overbought readings have often led to much stronger markets in the short term.

What is somewhat ironic is that the same breadth oscillator registered its most oversold reading in history, at –1410.09, on December 24th. So, in a mere 20 trading days, the oscillator moved from historically oversold to historically overbought. That is rare, but not entirely out of character, either. The previous most extreme overbought readings are summarized in the following table...

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