marketstrength - Updated Market Strength...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Updated 01/11/2006 Market Strength http://www.investopedia.com/university/strength/default.asp Thanks very much for downloading the printable version of this tutorial. As always, we welcome any feedback or suggestions. http://www.investopedia.com/contact.aspx Table of Contents 1) Market Strength: Introduction 2) Market Strength: S&P 500 Futures 3) Market Strength: Advancers To Decliners 4) Market Strength: Relative Strength Index and Arms 5) Market Strength: Oil and Bonds 6) Market Strength: Conclusion Introduction There is an old saying that seems to always apply to the investment world: "hindsight is 20/20". When looking one, three or six months into the past, we can easily tell what the market did and why it happened. But if you are looking to discover the trends of the market today, where do you look? In this tutorial we will go over various indicators used by traders and brokers to find out where the markets will open and how they will trade throughout the day. This tutorial will include an explanation of S&P 500 futures, the advance/decline line, the Relative Strength Index, the Arms Index, the price of oil and bonds and the ability of these indicators to detect market strength. Long-term investors should be warned, however. Over the long term, these day- to-day fluctuations in the markets are nothing to worry about, and for them, the long-term upward drift is much more important. S&P 500 Futures If you've ever watched financial television before or after the markets open you will probably notice that they often quote the latest index futures price on the "bug" in the bottom corner. The futures market is an important concept and can be used to gauge the trend of the market. (Page 1 of 7) Copyright © 2006, Investopedia.com - All rights reserved.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Investopedia.com – the resource for investing and personal finance education. Futures There are two types of futures contracts , financial and commodities. No matter which type of contract you buy the basic premise is the same. The buyer of the contract agrees to deliver the product (or cash for financial futures) at the contract price on the expiry date. A contract can be on anything from corn, wheat, oil or, in our case, a stock index. It should be noted that a majority of futures contracts get "closed out" before the delivery date and so no physical delivery actually takes place. The Standard and Poor's 500 index (S&P 500) contains many of the largest companies in the world, so it only makes sense that movement in the direction of the S&P futures is one of the best indicators of overall short-term market direction (Note: The Nasdaq futures are considered a good indicator of technology stocks). The word futures might make this indicator sound confusing but it really isn't. If S&P futures are up, it's an indication that there is upward pressure on the market and the stock market will tend to rise. On the other hand, if S&P futures are down, it's a sign that there is downward pressure on the market and it will likely trend lower. This rise or decline in the futures contract is usually calculated as a change from
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 05/17/2010 for the course BUS 001 taught by Professor Gra during the Spring '99 term at American University in Cairo.

Page1 / 7

marketstrength - Updated Market Strength...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online