How to Tell If Stocks Are Buying or Selling
There are a number of warning signals that may tell investors whether stocks are expected to advance or decline. Investors use two types of data to see if stocks are buying or selling: fundamental and technical. Fundamental data includes company-specific information as well as economic data that helps drive the market. Technical data focuses on the stock chart for your favorite stock or market. Traders look for market signals based on stock charts. Those who follow both fundamental and technical data can more clearly see changes coming.
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Watch for signs of recession. A looming recession slows stock buying because corporate sales and profits both decline. Newspapers, financial websites and financial news networks publish data the government releases about recessions. Focus on employment numbers released by the U.S. Labor Department, as well as on the gross domestic product, or GDP, a statistic showing the growth of the U.S. economy, released by the Bureau of Economic Analysis. If the rate of job loss increases and GDP slows, a recession could be coming.
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Track the value of the dollar against other currencies. The U.S. Dollar Currency Index shows how the dollar compares to other major currencies around the world. Track this index at any reputable investment tracking site, such as Yahoo Finance or MSN Money. According to Jim Stack, president of InvesTech Research, a drop in the price of the dollar of 5 percent over a short time is a "warning flag," and if it drops 10 percent, "it's possibly time to batten down the hatches." Since traders and analysts often talk about moves in terms of a day or week, investors watching currency fluctuation should focus on quick moves which drop currency levels in 30 days or less.
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Evaluate consumer spending. Companies are more likely to lure customers when people are buying. Stocks rise when company profits rise or in anticipation of rising profits. Look for consumer spending information in the Bureau of Economic Analysis' Personal Expense and Outlay report, which comes out near the end of each month.
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Follow the technical ratios of buyers to sellers and new highs to new lows. Financial sites like Yahoo! Finance and MSN Money track the number of companies that people are buying or selling. You can also see how many companies are trading at their lowest levels of the past year. If there are more new lows than new highs, the financial markets may be signaling a longer selling period for stocks.
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