Top-Down Investing.

Top-Down Investing.

Market Indicators.
Advance-Decline Line.
It tends to signal the end of a trend before the Moving Averages. The theory is that the
knowledgeable investors are the first to invest in a rising market and the first to get out
when a market stops rising
The theory dictates that when more stocks than normal remain unchanged in price the
market is at a top or a bottom and about to change direction. To calculate the index divide
the number of unchanged shares by the total number of traded shares. The percentage is
usually between 5 and 25%. If it is near to 5% this is considered bullish, if near to 25%
bearish.
Odd Lot Purchases.
A large volume of odd lot buying by the general public is a sign that the market is about
to fall. Moreover, odd lot selling is an indication that the market is about to rise. It is
based on the belief that the general public always get it wrong.

Bull/Bear Ratio.
High readings are bearish and low, bullish. Over 60% suggests extreme optimism and the
onset of a bear market; below 40%, extreme pessimism and time for a bull market.

Put/Call Ratio.
Purchasers of Puts expect the market to decline and purchasers of Calls expect the market
to rise. The balance between the two gives an indication of bearish or bullish expectations
among sophisticated options traders. As traders become bullish, the Put/Call Ratio will
increase; as they become bearish, it will decline.

Sentiment Analysis.
When stock market advisers display extremes of either optimism or pessimism, the trend
is probably about to reverse.

Money Supply.
The greater the increase in M1 Money Supply the greater the chance of an upturn.

Net Free Reserves.
If banks have lots of excess cash in their reserves, this usually goes to business loans with
consequent expansion of the economy.

Interest Rates.
A fall in base rates is a bullish indicator, and an increase bearish.