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Indicators I like to follow

Most market pros look for hints on where the Dow, Nasdaq and S&P are going from signals within individual sectors. These are some I follow (with links to their charts at

  • Dow Jones Transportation Index: Often a leading indicator because companies that ship products and people feel the effects of economic shifts first.
  • Philadelphia Semiconductor Index: Pretty much everything in the Nasdaq starts with the fundamental building blocks: microprocessors. I don’t trust any rally if the SOX isn’t playing along (and preferably leading the way). Tech stocks generally lead the markets, and the SOX generally leads tech stocks.
  • CBOT VIX: The celebrated “fear index” can be useful in the context of a sustained bull market: big breaks to the upside on the VIX almost always correlate to recoveries in the broader markets. However: VIX followers who bought stocks at historic highs back in October — when it hit 50 for the first time in several years — got blasted when it rose to 80 amid the credit market meltdown.
  • U.S. Dollar index: Especially important for Caterpillar watchers because a cheap dollar makes expensive Caterpillar tractors built in the U.S. cheaper overseas.

One of the trustiest adages I’ve heard over the years is “let the trend be your friend.” These indicators help confirm or refute which way the prevailing winds are blowing. There are, of course, thousands more. The only indicators that really matter are how much you paid for your stock and how much you can sell it for; the rest are all hints.

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Tom Mangan posted at 9:57 am January 9th, 2009 |

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