RGD Countertrend Breadth Update — A Critical Point for Market Structure

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RGD Countertrend Breadth Update — A Critical Point for Market Structure

Over the past few years, whenever our RGD breadth gauge crossed above the 300 oversold zone (May-June 2022 and Feb–Mar 2025), the market was in deep corrective phases. Both those periods eventually led to healthy rebounds

Today, breadth has once again reached that same oversold zone — but with one major difference:
the market is sitting near all-time highs, not in a downtrend.

This divergence makes the current setup far more nuanced and opens three clear paths ahead:

1️⃣ Short-Term Shakeout (5–7% pullback)

A mild correction to reset excess positioning, allow sectors to rotate, and improve market-wide risk-reward.

2️⃣ Time Correction (8–12 weeks of consolidation)

Markets hold higher levels while smallcaps and microcaps continue their flush-out phase. This would allow quality leadership to strengthen.

3️⃣ Liquidity-Driven Breakout

Fresh liquidity flows into market → breadth normalizes → indices achieve a decisive breakout above ATH with participation from from heavyweights sectors.

As always, we track breadth, liquidity, and sector rotation together to identify the most probable path — and adjust our strategy proactively rather than reactively.

Staying disciplined matters more than predicting.

Nishesh jani,CFTe

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