Pay Attention to the Ratio of Leader Stocks to Broad Market Stocks ...
Every night, we measure the percentage "change of direction" of Leader Stocks and the stocks in the Broad Market. We then divide the two to get a Ratio of Leaders to Broad market stocks.
Leader stocks are named that for a very good reason ... they set the pace and direction of the market. When the Leadership Ratio is high, they "pull up the Broad market stocks".
Currently, the Leadership Ratio is positive, but very close to zero and the Ratio is also divergent to the stock market's up movement. Negative divergences can be a warning sign like it was in early February before the sharp drop.
With its current low reading and divergence, this is an "Alert condition" where caution levels should now be elevated. (This information is posted daily on our Advanced subscriber site.)