Fosback Absolute Breadth Shows a Quiet Market

Years ago, analyst Norman Fosback hatched the idea of looking at the absolute value of the daily breadth (A-D) numbers.  He discarded the direction, i.e. whether it was positive or negative, to just look at how big the numbers were in recent days.  That is what this week's chart shows, employing a 21-day simple moving average for smoothing the data.

The principle behind this is that at market bottoms, things get loud and hectic, both upward and downward.  So high readings for absolute breadth numbers show a bottoming condition for prices.  Tops are the opposite, with things getting quiet.  So a low reading shows a topping condition.

This is the point in the discussion where I insert one of my most essential points: a "condition" is not a "signal".  The market can remain overbought, or overly optimistic, for a while before that condition decides to matter.  So this is another in a long series of indicators which will not tell you the exact moment of a turning point for prices.  It only tells us that a top is due. 

It is worth noting that there was a big low reading for this indicator in September to October 2025, and the market kept trending higher anyway.  That is an important lesson about indicators generally.  A strong trend, either up or down, can ignore topping and bottoming conditions.  So if you see such a condition and it does not matter, that is a good way to know you are in a strong trend.

One other point about this indicator worth observing is that one must be careful in assigning values for what constitutes "high" or "low" readings.  Those levels can change over time.  Here is a longer term chart from a few years ago to help make this point.

Notice that during the early 2000s, the values had a much lower range than what we saw afterward.  It may be a coincidence that the "uptick rule" for shorting stocks was eliminated in 2007, which was right when there was a big range expansion for this indicator.  And 2007 was also interesting in that we did not see a low reading to mark that year's major price top. 

We are seeing a low reading right now here in June 2026, as seen in the top chart above.  And the range of values has been drifting a bit lower since the April 2025 tariff tantrum.  That could be a new regime of values for this indicator, or just normal variation.  The point is that one cannot reliably pick a threshold for this indicator to hit and then make a trade off of it.  This is not a trading signal type of indicator.

But it is still a useful piece of information, helping us to see that the breadth data are acting abnormally quiet, which is a sign that things are about to get spicy again.