Evaluating the Market’s Momentum Before It Is Too Late

So you’re not a market technician… no problem.

That doesn’t mean you can’t evaluate the market’s momentum before it’s too late.

After all, anyone can look at a chart and say, “yep, that there is the bottom” and “yep, that there is the top” after they have already formed. Forecasting is far more difficult than reporting… just as the weatherman. Poor guy… always the only one on the news out on a limb… forecasting what is “likely” to happen rather than reporting on what has already happened. So, today I thought I’d provide a very simple way anyone (yes ANYONE) can evaluate the market’s momentum before it’s too late.

Here’s the goal… to be able to quickly and simply evaluate which direction the overall market is moving so you can execute your trades accordingly, preserving capital and making profits. It’s simple really…

Begin by identifying 10 market leaders. I’d suggest you use a broad range of stocks from various sectors. Also, I’d suggest you use stocks that are recognizable… after all, these are the one’s that are most likely in the minds of most investors. Since we are trying to measure the broad market momentum, not a specific sector or a possible start-up, we want to stay with the big, recognizable names. Here’s 10 you may want to consider… but are in no way “intrenched” as the 10 you must follow. In fact, this list is fluid… changing over time.

Kellogg (K), Baidu (BIDU), Apple (AAPL), Disney (DIS), Tech Resources (TCK), Johnson and Johnson (JNJ), McDonalds (MCD), Intel (INTC), Coca-Cola (KO), Lululemon (LULU).

Of course, this list is specific to the US markets; however, the Canadian markets often follow similar patterns and experience similar pressures. Of course, if you’d like to know a few of my Canadian meta-trend names, let me know.

So, what do you do with this list? Well, it’s simple really. Plug them in… on a weekly chart… and simply count. If 8 of 10 are in one direction, the market is trending strongly in that direction. If 5 of 10 are in one direction, the market is shifting and may be moving toward a new trend.

Based on the trend of the market, you can make decisions on entry and exit points for stocks, protecting your capital while maximizing your returns.

That’s a simple, quick way to help everyday investors evaluate the market’s momentum before it’s too late. Do you have a simple method to determine the market’s momentum? What stocks would you add to/delete from the list?