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What are Market Indicators?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 06 November 2016
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Market indicators are various types of data that relate to the current condition of different investment markets, and provide insight into the possible future movements of those same markets. In some cases, the term is used to identify events in general, such as changes in the leadership of an industry leader and the possible impact those events could have on the market where the stocks of companies active in that industry are traded. At other times, market indicators are formal indices that investors consult before making investment decisions.

There are several well-known indices that are utilized as market indicators today. One example is the Hindenburg Omen, which seeks to analyze currently available marketing data as a means of determining if a stock market crash is likely to occur within a given period of time. The fanciful name for this particular indicator comes from crash of the German zeppelin known as the Hindenburg in 1937, considered one of the worst disasters of the 20th century.

Another of the several common market indicators is the McClellan Oscillator. This particular indicator is a popular resource utilized by brokers and analysts to determine the entry and exit of money from the New York Stock Exchange. The information aids in identifying situations where various securities are either overbought or oversold through the Exchange, and the effect that those transactions have on the market as a whole.

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There are a number of other market indicators that analysts routinely utilize in order to identify upcoming trends in various markets. A few of these include the NASDAQ Composite, the Absolute Breath Index, the Advance/Decline Line, and the S&P 500. It is not unusual for analysts to utilize a number of market indicators in discerning future movements within the marketplace, assessing the collected data as a means of increasing the potential of making investment decisions that will ultimately benefit investors as the markets react to different types of events.

As with most investment tools, market indicators are not infallible. While very helpful in understanding what is happening in the marketplace and what is likely to occur in the future, there is always the potential for unanticipated events to drastically alter the predictions that result from assessing data from various indicators. For this reason, investors and analysts alike constantly revisit various indicators to determine if the events of today have made any significant shift in where the market is predicted to go tomorrow.

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