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📘 Market Health Documentation

Institutional market regime model combining trend, breadth, volatility, and macro conditions

The Market Health indicator is a composite institutional-style score designed to evaluate the overall strength and quality of the market environment.

The score ranges from 0 to 100 and combines six major components: trend structure, breadth participation, risk appetite, volatility conditions, interest rate pressure, and broad index alignment.

1. Market Trend (30 points)

The system evaluates whether major indexes are in confirmed uptrends:

  • S&P 500
  • Dow Jones Industrial Average
  • NYSE Composite

An index is bullish when:

  • Price is above the 50-day moving average
  • 50-day moving average is above the 200-day moving average
  • 3 indexes bullish → 30 points
  • 2 indexes bullish → 20 points
  • 1 index bullish → 10 points
  • None bullish → 0 points

2. Market Breadth (15 points)

Breadth measures how broadly participation is distributed across the market. The NYSE Composite is compared against the S&P 500.

  • NYSE outperforming S&P → 15 points
  • Within 1% of S&P → 8 points
  • Weak breadth → 0 points

3. Risk Appetite (20 points)

Risk appetite evaluates whether investors prefer aggressive growth assets. Strong bull markets usually show leadership from:

  • Nasdaq
  • Russell 2000
  • Nasdaq + Russell outperform S&P → 20 points
  • Only Nasdaq leads → 12 points
  • Only Russell leads → 8 points
  • Neither leads → 0 points

4. Volatility Environment (15 points)

The VIX volatility index measures market stress. Lower volatility generally indicates healthier conditions.

  • VIX below 15 → 15 points
  • VIX between 15–20 → 10 points
  • VIX between 20–30 → 5 points
  • VIX above 30 → 0 points

5. Interest Rate Environment (10 points)

Interest rates affect liquidity and equity valuations. The system evaluates:

  • 10-Year Treasury Yield
  • 30-Year Treasury Yield
  • 10Y < 5% and 30Y < 6% → 10 points
  • 10Y < 5.5% → 6 points
  • Otherwise → 3 points

6. Index Alignment (10 points)

Measures how many major indexes are trading above their 50-day moving averages.

  • 5 indexes above 50DMA → 10 points
  • 4 indexes above → 7 points
  • 3 indexes above → 4 points
  • Fewer than 3 → 0 points

Final Formula

Market Health = Trend + Breadth + Risk Appetite + Volatility + Rates + Alignment

Score Interpretation

  • 80–100: Strong bullish environment
  • 60–79: Healthy market conditions
  • 40–59: Mixed / neutral market
  • Below 40: Weak or risk-off market