MARKET INDICATORS

Market indicators add significant depth to techinical analysis because they contain much more information than price and volume. A typical approach is to use market indicators to determine where the overall market is headed and then use price/volume indicators to determine when to buy or sell an individual security. The analogy being "all boats rise in a rising tide," it is therefore much less risky to own stocks the market is rising.
Market indicators typically fall into three catagories: 1.Monetary 2.Sentiment and 3.Momentum
1.Monetary market indicator: Monetary indicators concetrate on economic data such as interest rates. They help you determine the economic environment in which business operate. These externel forces directly affect a business profitability and share price.
Exmples of monetary indicators are interest rates, the money supply, consumer debt, and inflation.
2.Sentiment market indicators: Sentiment market indicators focus on investor expectations often before those expectations are discernible in prices. With an individual security, the price is often the only meausre of investor sentiment available. However, for large market suc as the New York Stock Exchange, many more sentiment indicators are available. These include the number fo odd lot sales(i.e., what are the smallest investors doing?), the put/call ratio (i.e., what are the people are buying puts versus calls?), the premium on stock index futures, the ratio of bullish versus bearish investment advisors, etc.
3.Momentum market indicator: The third catogery of market indicators momentum, shows what prices are actually doing. But do so by looking deeper than price examples of momentum indicators include all of the price/volume indicators applied to the various market indices(e.g., the MACD), the number of stocks that made new highs versus the number of stocks making new lows, the relationship between the number of stocks that advanced in price versus the number that declined, the comparision of the volume associated with increased price with the volume associated with decreased price, etc.
A) The external monetary conditions affecting security prices, this tells us what security prices should do.
B) The sentiment of various sectors of the investment community. This tells us what investor expect prices to do.
C) The current momentum of the market. This tells us what prices are actually doing.