CTA Volume Analysis & Market Breadth 2

Question 1

The Arms Index (TRIN) is calculated as:

Accepted Answer

(Advancing issues / Declining issues) / (Advancing volume / Declining volume)

Answer

TRIN divides the ratio of advancing to declining stocks by the ratio of advancing to declining volume, with readings below 1.0 indicating bullish conditions and above 1.0 bearish.

Question 2

A 'breadth thrust' occurs when:

Accepted Answer

An extremely high percentage of stocks advance strongly over a short period, signaling a powerful new uptrend

Answer

A breadth thrust is a rare, powerful bullish signal where advancing stocks overwhelm declining stocks (often 90%+ advancing) in a short window, indicating broad market strength.

Question 3

What does the McClellan Oscillator measure?

Accepted Answer

A smoothed difference between advancing and declining issues using two exponential moving averages

Answer

The McClellan Oscillator applies a 19-day and 39-day EMA to the daily net advance-decline figure, creating a momentum oscillator of market breadth.

Question 4

When the majority of stocks in an index are declining but the index itself is rising, this divergence suggests:

Accepted Answer

The rally is narrow and driven by a few large-cap stocks, which is a bearish warning

Answer

A rising index led by only a handful of large-cap stocks while breadth deteriorates is a classic warning sign that the underlying market is weakening beneath the surface.

Question 5

In volume analysis, what does 'accumulation' typically look like on a chart?

Accepted Answer

Higher volume on up days and lower volume on down days over a period

Answer

Accumulation is identified by above-average volume on advances and below-average volume on declines, indicating that buyers are absorbing supply and building positions over time.

CTA - Certified Technical Analyst Practice Test

CTA - Certified Technical Analyst Practice Test

CTA Volume Analysis & Market Breadth 2