New to the stock market?

For those of you new to the stock market, we have this short and practical guide to explain some basic concepts and help get you started.

Introduction to Technical Indicators

An indicator is a result of mathematical calculation, based on prices and/or volume. The figures received are used to measure current market conditions as well as to forecast price changes. Indicators are used extensively in technical analysis.

This section describes the different technical studies used in our SPY (S&P 500) technical analysis charts and how those indicators can be used to help interpret price movement.

Trend Chart - Money Flow Graph

The Trend-Chart was created to broadly measure daily changes in supply and demand. Regular stock charts based on price movement alone only give investors a partial picture of the investment landscape. The Trend-Chart also factors in the number of advancing stocks, versus declining stocks (sum of the difference between the number of stocks closing higher, minus the number of stocks closing lower), up-and-down volume (supply and demand), and price data for the NYSE, NASDAQ and AMEX stocks, to gauge the strength of the entire market. 

Most stock indices, even those quoted as representing the total market, only reflect a small portion of the actual market. The S&P 500 is a market-cap weighted index, as are almost all of the major indices. Weighting by market capitalization gives more importance to larger companies, so if the S&P 500 moves up by 20 points, there is no way to tell if the increase is the result of only one large-cap stock going way up, or results from many stocks, each going up on solid volume. The Trend-Chart addresses this issue.

In order to qualify the significance of a trend, volume is a key consideration. A market that shows sharp price movements, in either direction, without corresponding volume support, is sending false messages that should be watched carefully. The presence of bullish volume could mean that big players are on the field. Is cash flowing in or out of the market? The Trend-Chart measures exactly how much of the "smart money's" cash is moving into, or out of, the stock market.

The basic principal behind the graph is really very simple. The green bars/candles show days when money is flowing into the market, and the red bars/candles show days when money is flowing out of the market. The bar/candle size is also an important strength indicator to watch closely. Large bars/candles indicate a strong trend, while small bars/candles can indicate a weaker one.

The chart will display:

1. A rising row of large, green bars/candles indicates a healthy stock market (accumulation).

2. A falling row of large, red bars/candles indicates a weak stock market (distribution).

3. A flat row of mixed-colored bars/candles indicates an indecisive, trend-less stock market (consolidation).

It is also important to keep an eye on technical support and resistance levels, as well as new high/lows and bullish/bearish chart pattern divergence between the Trend-Chart and the Regular Price Chart. What you want to look for here is confirmation of the price trend by the Trend-Chart. A divergence between the direction of the Trend-Chart and the price action foretells that a trend reversal may be in the works.

It is just common sense: when the big players are entering the stock market prices will go up. Using the Trend-Chart, you can actually see these buyers entering with your own eyes. In fact, you can even tell if they are spending big money or not.

Bull/Bear Score

The bull/bear score is a technical trading tool which will analyze a stock using thirteen popular analytics in short, medium and long term periods. Results are interpreted as bullish, neutral or bearish signals, each with numeric ratings, and summarized with an overall percentage score.

Each score requires six months' worth of trading activity and run the prices through 13 different technical indicators.  After each calculation the program assigns a bull, bear or neutral value with the study, depending on where the price lies in reference to the common interpretation of the study. 

For example, a price above its moving average is generally considered bullish. 

Each study links to a chart to give you a graphical interpretation of the result of the study. 

Calculations:

The short-, medium- and long-term indicators are grouped together and calculated separately for their groups. The overall indicators includes all 13 studies listed on the page. 

A bull signal is assigned 1 point
A bear signal is assigned -1 point
A neutral signal is assigned 0 points 

Add up the totals for the different groups and divide this number by the amount of studies in the group, and take this number as a percentage. If the total is greater than zero, then this signal is bullish. If the total is zero, then this signal is neutral and if the total is less than zero, then this signal is bearish.

To keep the results in a more logical format, we factor the overall opinion by 1.04 to keep the end result in eighths, with the exception of a 100% buy or sells. This is why the opinions will be displayed {8%, 16%, ... 88%, 96% and 100%} rather the true calculated value over the number thirteen. 

At the bottom of the bull/bear score page is the price the opinion studies are based on, along with the support, pivot point, and resistance numbers. The pivot itself can be used as somewhat of a test price for the short-term trend. The pivot point represents a weighted average of the previous day's session since it is the average of the high, low and settlement. If the market rallies above the pivot point, for example, the market may be indicating some strength. A weak market would be suggested by a price move below the pivot point. 

Pivot points are used primarily as support/resistance numbers. Of the first pivot values, the pivot point itself is the best support/resistance level. The 1st and 2nd support/resistance levels have less reliability. All these pivot numbers are very popular on the exchange floors and are used by a significant number of traders.

Scores are updated once a day at 6 p.m. ET.

Price quotes, company profile, market overview and pre-market commentary

Your subscription also gives you access to historical price and earnings quotes for all stock in the database. The company profile displays fundamental information and other company data at a glance, including company financials, industry, address, contact numbers and product/service offerings. The stock market overview contains a financial market snapshot updated continuously during the day and provide key market data, offering a glimpse at how the trading day is unfolding.

Our daily pre-market commentary provide an analysis of the scheduled items that will influence the short-term direction of the stock market and gives you valuable outlooks, news, research and opinions concerning current market conditions.