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17 Jan 2026

How is the health of the market?

When someone asks me in a conversation, how is the market? What is the right answer for this? Let us decode this today.

Universe of stocks

There are say 2,500 listed stocks in the Indian stock market. Now if you are a trader you trade any stock out of these stock universe. Simultaneously, newspapers and various online articles flash headlines like Nifty at all time high, which was few weeks back, at the start of new year.

But, I always try to look at market strength. Like in school, when teacher gave everyone homework in Mathematics, there were few people who would solve the questions. Alternatively, assuming an easy subject (not for everyone I am sure ) like write an essay on any topic of your choice, many students would be able to write without any help.

Now, similarly in stock market, headlines are made basis Nifty 50 stocks, which is basically your handpicked, cherrypicked 50 bright stocks. If they are performing, that doesnt mean the entire class is performing well. How do we know if the entire class is performing – Looking at market internals or market breadth.

There are many different ways to look at it – You can pick and choose as per your wish (Advance/Decline Line. Net New highs etc.)

What do I look at ?

I look at what percentage of stocks are above 50 day moving average (50 EMA). This tells me if the entire class or stocks are performing or only the brightest few (Nifty 50) is performing. When the entire class is performing, that is the time I can be sure that my Probability of success will increase (Paper is easy !) Remember, we work on probabilities in stock market.

Lets look at numbers

During the start of new year – Around 40-42% stocks were above 50 EMA. The stage was setting up well. However, that was not for long duration, currently, only 25% stocks are above 50 EMA. This means fewer breakouts will work for you. What should you do? Keep your strike to the lowest, save yourself, do nothing much. Once your time comes, you will shine!

Thats it for today. Simple things work in stock market, we do not have to trade each day. Trade only in the best season, and you will make some money.

(You can read why Moving averages are important, in my another blog topic)