Chartered Market Technician Practice Exam 2025 – Complete Prep Guide

The "Percentage of stocks above their 50-day moving average (MA)" is an important indicator used to assess market breadth, reflecting the strength or weakness of a market. When this percentage reaches 75%, it suggests that a significant majority of stocks are trading above their 50-day moving average, indicating strong bullish sentiment and momentum in the market.

At this level, market conditions can become stretched, leading to the potential for a pullback or a correction, as excessive bullishness may often precede market reversals. Typically, a high reading like 75% may indicate an overbought condition, suggesting that stocks may have risen too far too fast, and a reevaluation could be needed.

While levels above 75% can indeed indicate overheating in market sentiment, 90% and 100% are extreme thresholds that would suggest an unsustainable level of buying, occurring in very rare instances. Although 50% is more neutral and indicates a balanced state between bullish and bearish sentiment, it does not signal an overbought condition. Therefore, the 75% level is typically recognized within technical analysis as a key point where overbought conditions can be anticipated.