5 Market Indicators to Watch (And What They Mean)

Every investor looks for an edge when putting their money to work in the financial markets.

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Every investor looks for an edge when putting their money to work in the financial markets. Most rely on company information such as earnings and sales to decide if a company is in good shape and its stock is likely to increase in value. Several metrics, such as the price-to-earnings ratio (P/E), are widely followed.

But everyone sees that information, so there is little edge to be had. Even more problematic: Much of the data upon which investors rely is derived by Wall Street analysts, filtered through their own expertise and bias. How can anyone know for sure what a company will earn next year, let alone five years from now?

Investors should consider a few other market indicators that aren’t so familiar. These do not rely on educated guesses as to what will happen in the future; rather, they come straight from the market itself. They encapsulate the market’s outlook for capital appreciation. And they can give us an idea about how the market feels about things.

Put differently: They can help us tap into the market’s mood.

There is nothing wrong with getting a handle on next year’s business and economic prospects. It’s also a good idea to get an expert’s take on how new tax legislation and geopolitical events could impact a company’s fortunes. But these five market indicators let you know not just what Wall Street thinks, but what the market thinks, giving you a complete picture to build your strategy around.

Michael Kahn
Contributing Writer, Kiplinger.com
Michael Kahn, CMT (Chartered Market Technician) has been writing about the markets since 1986. He is the author of three books on technical analysis published in five languages. His specialty: jargon-free analysis accessible to everyone. He has contributed to many leading financial media including Barron's Online, MarketWatch and Nightly Business Report and was the Chief Technical Analyst for BridgeNews.