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.

1Comment
Mar 6, 2011 9:57PM
avatar

Hot  thanks jim - good stuff.  we are a bit more simplistic with our top three:

 

1.  where are we in the four bull years and one bear year historical cycle?

 

2.  is the s&p 500 trend line hitting higher highs and higher lows, or lower highs and lower lows?

 

3.  what financial system or geo-political situations could either power the market up or down in and of themselves?

 

obviously 1995 to 2011 had some classic examples of the bull/bear cycles, the S&P 500 trend line was sideways for six months or so at each major inflection point, and the tech-wreck, 9/11, no wmd in iraq, the advent of highly leveraged cdo's and unregulated derivative markets, and the markets survival of touching on the evil 666 bottom were all qualitative input events.

 

we do broad market timing or tactical asset allocation with aplomb since 1999 when we got religion (amerindo tech d mutual fund made 254 percent that year). 

 

be safe out there ......... 

Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

133
133 rated 1
286
286 rated 2
441
441 rated 3
737
737 rated 4
614
614 rated 5
606
606 rated 6
621
621 rated 7
441
441 rated 8
317
317 rated 9
122
122 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
BBBYBED BATH & BEYOND INC10
TWXTIME WARNER Inc10
COPCONOCOPHILLIPS9
HDHOME DEPOT Inc9
VZVERIZON COMMUNICATIONS9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.