Whenever I talk to anyone about the stock market, the question that come up most often after what stock to buy is this. Should I buy shares now? The first place you need to check after you have found a stock you want to buy is to check the market indexes to determine whether they are on the way up, on the way down or moving sideways.
When you do this, there are four indexes that you will want to focus on. They are:
- S&P 500
- NYSE Composite http://www.dubaixpats.com/
- Dow Jones Industrial Average
- NASDAQ
You'll want to get in the habit of reviewing these indexes on a daily basis. When you do, there are three things you'll want to pay attention to. The first is the overall trend of the market. Is it going up or down or sideways? The second is the daily price and volume action that occurs. After the market closes, check to see if the index closed higher or lower. After that, review the volume for the day. Was it higher or lower than the previous day? If it was lower than the previous day, then today's action doesn't really affect the trend. Volume higher than the day before is a different story.
If the index closed higher on higher volume, then big money is buying stocks and pushing prices higher. If the index closed lower on higher volume, then this is your clue that institutional money is selling stocks. This could indicate weakness in the market if it occurs several times over a short period of time. By watching each index for this data, you'll eventually develop a keen sense on what's going to happen and instead of asking others whether the market is good to get into, you'll have your own opinion.
In fact, you should strive to do that in all of your investing decisions.
Learn more about how to buy shares and stock market investing at Stock Market Investing Today.
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