Larry Carhartt on Why Breadth Data is the Better Way to Track Indexes and ETFs

Market breadth data has been a hidden gem for investors looking for a deeper understanding of market dynamics. Since at least the 70s, this approach has provided unique observations into the health and direction of markets by analyzing the internal behaviors of stocks within indexes or ETFs. Despite its utility, breadth data is a term rarely heard in the investment world. However, Larry Carhartt, a pioneer in the investment advisory space, is reviving its relevance today.

Breadth data, also known as internal market data, summarizes the behavior of groups of symbols by analyzing the number of stocks rising relative to those in decline in an index or stock exchange, like the S&P 500 or the New York Stock Exchange (NYSE). As Larry describes, “It tracks how many stocks in a group are advancing, declining, hitting new highs, or hitting new lows.” Market breadth data offers a snapshot of underlying market sentiment, showing trends that traditional technical analyses might miss.

“Breadth data is basically a composite of stocks; a good marker for whether the market you’re looking at is doing well. Breadth data tells you when to keep an eye open, when to sell, and what’s going on inside the composite,” Larry explains.

In the early days of stock markets like the NYSE, breadth data used to be calculated by hand and posted daily on chalkboards for traders to assess the state of the market and predict trends. But as exchanges grew and listings multiplied, manually calculating this data became impractical— and impossible. So, attention shifted to price charts and volume indicators, the building blocks of technical analysis, sidelining breadth data despite its unique value.

Today, with hundreds of thousands of stocks and exchange-traded funds (ETFs) traded globally, tracking breadth data is a lot more difficult in terms of computing power. Computing breadth data for just one index, like the S&P 500, requires analyzing the movements of all 500 constituent stocks every day. For ETFs, which can represent sectors, industries, or just custom stock groupings, this process becomes even more complex. Despite these many challenges, however, market breadth data remains a priceless gauge of market securities.

Market breadth data can help identify trends, highlight potential risks, and provide insights for timing market decisions. Larry gives an example: “If 250 of the stocks in the S&P 500 went up by 5%, 50 went down, and the remaining 200 stocks stayed the same, that would let you know that the S&P is looking pretty good.” He continues, “However, if the S&P rises but 60 of its stocks are declining, it could signal a weakening rally.”

Larry Carhartt began his journey with market breadth data in the 1990s when his trading buddies asked a simple question: What stocks are in the S&P 500? “I generally get asked to do things that can’t be done. And then figure out a way to do them anyway. It’s not uncommon,” he adds. After extensive research, he compiled the complete holdings list of the S&P 500. This became the start of his illustrious affair with breadth data.

Carhartt was in fact one of the first to provide market breadth data online in the 1990s. “My website used to be called Master Data Reports, and it was one of the first internet domain names ever issued. So, I’m one of the OGs, as they might say.” Today, his platform tracks 64 of the top trading EFTs, computing their breadth data every night.

His platform, now called AmericanETP.com, enables investors to make informed decisions through his detailed insights into individual ETFs and indexes. AmericanETP demonstrates the weight of looking further than the standard metrics to offer a deeper understanding of market dynamics. Larry shares, “If I appeal to anybody, it would be appealing to people who understand the market and want to make some money.”

Larry Carhartt’s next goal is to grow from the top 64 to the top 100 EFTs by mid-2025, creating a comprehensive breadth data resources. As AmericanETP evolves, so do its applications with it. Market breadth data’s ability to reveal internal market trends makes it an indispensable tool for modern investors to return to. With a mission to ensure that breadth data remains a cornerstone for smart investing, Carhartt concludes, “My website is soon to display the best ideas of the day because they’re based on breadth data.”