My 3 favorite market indicators

Cut through all the headlines and determine the market direction for yourself

By Jim Van Meerten Mar 5, 2011 11:22AM

Each week end I step back and see where the market really is.  It's very confusing to listen to the talking heads on all the financial news channels so I use these 2 indicators to keep my head straight.  All of these indicators can be found on Barchart.


The first and I think the most important is the Value Line Arithmetic Index.  It a simple unweighted index that measures the change of approximately 1700 of the largest stocks covered by the Value Line Investment Survey.  These 1700 stocks constitute about 95% of the entire US stock market capitalization.  Most investors I've talked to invest a percentage of their money in each stock rather than weighting their portfolio by market capitalization.  This unweighted index of 1700 stocks gives me a better feel of the market than the weighted  and much smaller Dow 30 or S&P 500.


My chart shows the index against its 20, 50 and 100 day moving average and uses the Barchart Trend Spotter (tm) which is an indicator of the weighted results of Barchart's 12 technical indicators.


You can see from this weeks chart that the market has paused..



The next table shows how many of approximately 6000 stocks are trading above their 20, 50 and 100 day moving averages not only today but also yesterday , last week and last month.  A good way to see if the market is getting stronger or weaker,  Clearly the 20 day moving average shows the market is just slightly above average

 
Market MomentumSaturday, Mar 5th, 2011
Percentage of Stocks Above Moving Average 

Market Momentum Get Chart

Advances

Unchs

Declines

20-Day

MA Get Chart 

50-Day

MA Get Chart 

100-Day

MA Get Chart  

150-Day

MA Get Chart  

200-Day

MA Get Chart  

Today

-0.40%

1310

157

2765

53.78%

61.48%

71.99%

79.96%

81.33%

Yesterday

+1.69%

3430

88

714

61.53%

65.03%

74.64%

81.19%

82.32%

Last Week

+1.81%

3576

80

576

57.94%

62.74%

73.77%

80.93%

81.68%

Last Month

+0.30%

2191

130

1911

57.82%

65.95%

77.29%

82.49%

80.74%

 

My last indicator is the number of stocks hitting new highs versus new lows for various periods.  A indicator that tells how many stocks have broken out of their trading channel and in which direction.  The 1 month new high of 506 dividend by the one month new low of 310 is a positive 1.63 (506/310 = 1.63) which for me is a bullish sign.

 
Current New Highs/Lows

Current information as of Friday, Mar 4th, 2011

 

Overall

NYSE

AMEX

Nasdaq

ETFs

OTCBB

Price

<$10

Price

>$10

Vol

<100K

Vol

>100K

1-Month Highs 

506

243

44

219

154

85

146

358

135

371

1-Month Lows  

310

121

25

164

33

62

171

138

114

196

3-Month Highs 

345

171

30

144

95

45

90

253

76

269

3-Month Lows  

117

45

11

61

18

22

69

47

31

124

6-Month Highs 

317

154

28

135

78

27

79

237

68

249

6-Month Lows  

49

13

5

31

13

8

38

11

11

38

 

I'm no genius but most investors think they are.  I do believe in the old adage "A rising tide floats all boats",  Before you try to find those stocks you think will beat the market look at these 3 indicators to see if you even want to be in the market.

 

Jim Van Meerten is an analyst for  Marketocracy Capital Management.  He shares his knowledge and experience from over 40 years of investing in stocks, mutual funds and ETFs on Barchart.com  in his daily blog -- Barchart Portfolio Blogs.

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