In our last column, "taking a big-picture look at whether the S&P 500 is overbought," we looked at the long-term historical trend strength of the S&P 500. Today we want to look another equally important technical element of the S&P 500, which is the breadth or participation of the underlining securities.

There are many ways investors can look at measuring breadth, some of the more commonly followed concepts are looking at the number of stocks within an index that are above a long-term moving average like the 200-day moving average (MA). Another concept is looking at the advance/decline line on a rolling moving-average basis. While these techniques are helpful, they are not very good in reducing daily noise and can provide many false signals.

One of my favorite breadth indicators is the iVIEWMarkets strong-buy-to-strong-sell ratio for the S&P 500. It helps remove a lot of that daily noise that the above-mentioned indicators fail to provide. Essentially, the ratio grades only stocks that are technically in the top or bottom quartile or considered a strong buy or strong sell based on relative strength and momentum factors.

Simply put, investors will want to become more defensive as the number of strong sells (red line) crosses above the number of strong buys (green line). Conversely, investors will want to deploy capital as the number of strong buys cross above the strong sells.

Another data point investors will want to notice are extreme moves with in the S&P 500 as reference in the blue lines. “V”-shaped selloffs and recoveries are the hardest obstacle to overcome for trend followers. However, the strong-buy-to-strong-sell ratio can provide a clearer picture in a “V”-shaped market.

As we discussed in our previous column, forecasting price series cannot be done, and we can only see what is currently built into the current price. However, what we do know is the following:

The bullish crossover catalyst occurred on March 3. The breadth has increasingly turned bullish We have not seen as many strong buys within the S&P 500 since mid May 2015 The S&P 500 is not extended or overbought in the intermediate term On a technical basis, 2,060 is an important level, a close above this level will take the number of strong buys back to the 350 level.

For a larger chart, please click here.