Stock Market Indicators

Technical & Momentum Indicators (Timing & Trends)

These help you determine when to buy or sell based on price action.

• RSI (Relative Strength Index) - Why: It identifies overbought (expensive) or oversold (cheap) conditions. A value >70 often signals a pullback is due, while <30 suggests a bounce.
• MACD (Moving Average Convergence Divergence) - Why: A trend-following momentum indicator. It shows the relationship between two moving averages of a price; "crossovers" signal buy/sell opportunities.
• Bollinger Bands - Why: Measures volatility and relative price levels. When price hits the upper band, it's often overextended; when it hits the lower band, it may be a value opportunity. "Squeezes" (narrow bands) predict explosive moves.
• On-Balance Volume (OBV) - Why: Uses volume flow to predict price changes. If price is flat but OBV is rising, "smart money" is accumulating positions before a breakout.
• ATR (Average True Range) - Why: Measures absolute volatility (price movement in dollars) rather than direction. Crucial for setting Stop Loss levels (e.g., setting a stop at 2x ATR).
• 200-Day Moving Average - Why: The ultimate long-term trend filter. Institutions often defend this line. If price is above, the long-term trend is Up; if below, the trend is Down.

Market Sentiment (Psychology & Positioning)

These measure "Fear and Greed" to identify contrarian opportunities.

• Put/Call Ratio - Why: Measures the ratio of bearish puts to bullish calls being traded. Extremes in bearish betting (high ratio) often signal a market bottom (panic selling).
• Short Interest (% of Float) - Why: Shows how many investors are betting against a stock. High short interest can lead to a Short Squeeze (explosive upside) if positive news hits.
• Insider Buying/Selling Ratio - Why: Executives sell for many reasons (taxes, buying a house), but they only buy for one: they think the stock is going up. A cluster of insider buying is a strong bullish signal.
• AAII Investor Sentiment Survey - Why: A weekly survey of retail investors. Like the Put/Call ratio, it is a contrarian indicator; when retail is excessively bullish, it’s often a market top.
• MOVE Index (Bond Market Volatility) - Why: Often called the "VIX for Bonds." Since the stock market often follows the bond market, a spike in the MOVE index is a leading warning sign for stock crashes.

Advanced Fundamental / Quality Metrics

These go deeper than P/E to assess the true health of a company.

• Free Cash Flow (FCF) Yield - Why: "Cash is King." Earnings can be manipulated; cash flow cannot. This measures how much actual cash the business generates relative to its share price.
• EV/EBITDA - Why: A cleaner valuation metric than P/E because it ignores debt and tax structures. Often used by private equity to determine a company's buyout value.
• ROIC (Return on Invested Capital) - Why: The ultimate measure of a "Moat." It shows how efficiently management uses capital. Companies with high ROIC tend to outperform over the long run.
• Altman Z-Score - Why: A formula used to predict bankruptcy risk. A score below 1.8 indicates a high probability of financial distress within 2 years.
• Current Ratio - Why: Measures liquidity (Assets / Liabilities). A ratio < 1.0 means the company may struggle to pay its short-term bills (high risk).
• Gross Margin Trend - Why: Tracks pricing power. If margins are rising, the company can raise prices without losing customers. If falling, they are facing competition or rising costs.

Leading Macro-Economic Indicators

These predict where the economy is going before it hits the news.

• ISM Manufacturing & Services PMI - Why: The best leading indicator for the economy. A reading > 50 indicates expansion; < 50 indicates contraction (recession warning).
• Copper-to-Gold Ratio - Why: Copper is used in industry (growth), Gold is used for safety (fear). When Copper outperforms Gold, the global economy is expanding.
• Buffett Indicator (Total Market Cap to GDP) - Why: A long-term valuation measure. If the stock market is worth significantly more than the GDP (e.g., >150%), the broader market is considered overvalued.