Percent Above MA: Breadth Versus the Trend Line

Key Takeaways

• The reading equals the count of stocks above the chosen MA divided by total stocks in the universe, expressed as a percent.
• The 50 line marks neutral breadth; above 80 is overbought and below 20 is oversold for the 50-day version.
• Investors confuse short and long versions, comparing readings across different moving averages without adjusting context.
• StockCharts publishes the indicator for major indices using 20, 50, 100, 150, and 200-day SMAs.

What It Is

For each member of a defined universe (Dow, S&P 100, S&P 500, Nasdaq 100, NYSE, S&P/TSX), one of five moving averages is computed: 20, 50, 100, 150, or 200-day SMA. A stock is flagged "above" if its current close exceeds its own MA, "below" otherwise. The indicator is the percentage of names with the "above" flag set.

The 50-day version reflects short to medium-term breadth. The 150-day and 200-day versions reflect long-term breadth and tend to move more slowly. Each version answers a different question, so the choice of MA length should match the analytical horizon.

The Intuition

A moving average is a simple proxy for trend. If a stock trades above its 50-day SMA, the recent trend is up; below, the recent trend is down. Aggregating that binary state across an index gives you the share of stocks currently in an uptrend.

Headline price tells you what the index-weighted basket is doing. Percent above MA tells you what the equal-weighted membership is doing. When the two disagree, the disagreement is the signal.

How It Works

The formula is:

Percent Above MA(n) = 100 * (Stocks with Close > SMA(n)) / (Total Stocks)

For the 50-day version, common interpretation rules are:

• Above 80: overbought; broad participation but vulnerable to mean reversion
• 50 to 80: bullish bias
• 20 to 50: bearish bias
• Below 20: oversold; broad selling but capitulation may be near

For the 200-day version, thresholds shift slightly. Above 70 indicates a strong cyclical bull regime; below 30 indicates a cyclical bear. The 50 line is still the bull/bear divide for both versions.

Three uses dominate. First, monitor the 50 line for regime crosses sustained over multiple weeks. Second, look for divergences where the index makes a new high but percent above MA declines, signaling narrowing leadership. Third, fade extremes only when other oversold or overbought signals confirm.

Worked Example

Take a hypothetical S&P 500 reading for percent of stocks above their 50-day SMA on three dates:

• January 15: 78. Index near recent highs, broad participation.
• February 28: 62. Index has pushed higher by 3 percent, but breadth has slipped from 78 to 62 over six weeks. Leadership is narrowing.
• March 15: 38. Index drops 4 percent and breadth tumbles past 50, confirming the regime shift.

The pattern is canonical: breadth weakens before price, and the breakdown through 50 confirms what the slow erosion was warning. A trader watching only the index price would have been blindsided on March 15. A trader watching percent above 50-day SMA would have lightened exposure as the indicator slipped below 70 in mid-February.

If percent above the 200-day SMA was also above 70 throughout, the cyclical regime remained intact and the dip was a correction within an uptrend. If both 50-day and 200-day percent fell below 50, a deeper regime shift was underway.

Common Mistakes

1. Comparing different MA lengths. A 65 reading on the 50-day MA is not the same as 65 on the 200-day MA. Each has its own distribution.
2. Treating the 50 line as a single-day signal. Brief crosses are noise. Wait for multiple consecutive closes through the level or use a smoothing filter.
3. Ignoring the universe. Percent above MA for the Nasdaq 100 (100 stocks) is much choppier than for the S&P 500 (500 stocks). Adjust thresholds.
4. Fading every extreme blindly. Markets can stay above 80 or below 20 for weeks in strong trends. Pair extremes with momentum or sentiment confirmation.
5. Forgetting recompositions. Index rebalances and ticker swaps change the membership and can move the indicator without any underlying breadth shift.

Frequently Asked Questions

What is percent above moving average in simple terms? It is the share of stocks in an index that are currently trading above a chosen moving average like the 50-day or 200-day SMA. A reading of 65 means 65 percent of the names are in their own short-term uptrend.

How does percent above moving average affect investment decisions? Investors use it to gauge participation. A reading above 50 supports a fully invested bias; persistent readings below 30 favor defense. Divergences between price and the breadth reading often precede meaningful regime changes.

What is a real-world example of this indicator? At the March 2020 lows, percent of S&P 500 stocks above the 200-day SMA fell into the single digits, an extreme oversold print. The subsequent recovery back above 30 confirmed the regime shift before the index itself reclaimed prior highs.

How can investors use this indicator effectively? Pair the 50-day and 200-day versions to see short and long breadth simultaneously, watch the 50 line for confirmed regime crosses, and use divergences against price as warnings rather than triggers.

How is percent above MA different from the Bullish Percent Index? Percent above MA flips on a single day whenever a stock crosses its moving average. BPI flips only when a stock confirms a point-and-figure buy or sell signal, making BPI slower and more deliberate.

Sources

1. StockCharts ChartSchool. StockCharts Percent Above Moving Average. https://chartschool.stockcharts.com/table-of-contents/index-and-market-indicator-catalog/stockcharts-percent-above-moving-average
2. StockCharts ChartSchool. Percent Above Moving Average. https://chartschool.stockcharts.com/table-of-contents/market-indicators/percent-above-moving-average
3. StockCharts ChartSchool. Percent Above 50-day SMA Strategy. https://chartschool.stockcharts.com/table-of-contents/trading-strategies-and-models/trading-strategies/percent-above-50-day-sma
4. StockCharts ChartSchool. Distance From Moving Average. https://chartschool.stockcharts.com/table-of-contents/technical-indicators-and-overlays/technical-indicators/distance-from-moving-average

Disclaimer

This article is educational content only and is not financial advice. Nothing here is a recommendation to buy, sell, or hold any security. Consult a licensed advisor before making investment decisions.