Customer Reviews

Market Indicators: The Best-Kept Secret to More Effective Trading and Investing (Bloomberg Financial)

5 star:		(3)
4 star:		(2)
3 star:		(0)
2 star:		(0)
1 star:		(1)

 

 

As a long-time investor, I was familiar with many of the indicators in this book -- in that sense, there were no 'secrets' revealed. But what this book does is bring them together in a cohesive, well-documented and easy-to-read way. I found myself checking on referenced Internet sources which have now become part of my daily routine. For those interested in a comprehensive overview of what full-time investors and traders consider, this is a great book!

This is a very helpful book for an individual investor. It provides descriptions and explanations of indicators that can help investors understand overall market and individual stock price direction. The indicators covered in the book are the type that you will see referenced by professional investment managers in financial articles or other media as supporting an investment outlook or forecast. As an individual investor, I'm interested in being able to know where to find and how to use indicators that professionals employ in their analysis.

The reasons I like the book are because it has:

* Information on where to find market indicators and information that professionals use to make decisions
* Explanations of how to use the indicators, often times using a narrative to give additional context around cause and effect
* Big-Picture Macro Indicators which pertain to the overall direction of the market
* Stock-specific indicators to look for when evaluating individual stocks
* Straight-forward, descriptive language and extensive use of charts and diagrams to illuminate complex topics and explain industry-specific jargon - easy to read and understand.
* Explanations of motivations behind actions of various market participants
* Lively presentation of the subject matter - wry humor, anecdotes and witty quotes.
* References or source locations for the market indicators at the end of each chapter and then in a glossary format at the end of the book, which is useful when coming back for later review.

Essentially, a wealth of information is presented in a well-organized, logical format. The book progresses from broad market indicators early to company-specific indicators to use when evaluating particular stocks. I wish I had come across a book like this long ago.

Every one one us has limited bandwidth for analysis of data. We pick and choose a few ideas that seem to work for us, and then stick with them. That is often best, because good investors settle into investment methods that are consistent with their character. But every now and then it is good to open things up and try to see whether the investment methods can be improved.

For those that use market indicators, this is the sort of book that will make one say, "What if? What if I combine this market indicator with what I am doing now in my investing?" In most cases, the answer will be "Um, that doesn't seem to fit." But one good idea can pay for a book and then some. All investment strategies have weaknesses, but often the weaknesses of one method can be complemented by another. My favorite example is that as a value investor, I am almost always early. I buy and sell too soon, and leave profits on the table. Adding a momentum overlay can aid the value investor by delaying purchases of seemingly cheap stocks when the price is falling rapidly, and delaying sales of seemingly cheap stocks when the price is rising rapidly.

Looking outside your current circle of competence may yield some useful ideas, then. But how do you know where you might look if you're not aware that there might be indicators that you have never heard of? Market Indicators delivers a bevy of indicators in the following areas:

* Options-derived (VIX, put/call)
* Volume and Price driven (Money flow, rate of change, 90% up/down days, and more)
* Where the fast money invests (money in bull vs bear funds, sector fund sizes, and more)
* Analyzing the likely motives of other classes of investors (margin balances, short interest, etc.)
* Price Momentum and Mean-Reversion
* Measuring asset classes and sectors using fundamental metrics (Fed model, sector weightings, Q-ratio, etc.)
* Investor sentiment surveys
* How to use analyst opinions, if at all?
* News reporting and reactions of stocks to news
* Odd bits of news (CEO behavior, little things that indicate a qualitative change in the life of a company)
* Insider buying and selling
* Commodity market data (COT, etc.)
* Bond market behavior (credit cycle, Fed moves, Credit Default Swaps, and more)
* Changes in the capital structure (M&A, equity/debt issuance, etc.)
* Monitoring the greats (13F filings)

No one can use all of these indicators. You can probably only use a fraction of these indicators. But being aware of how others view the market can widen your perspective, and help to reduce negative surprises on your part.

Quibbles

By its nature, since the book cuts across a wide number of areas in 216 short pages, you only get a taste of everything. I liked this book, but there is room for a second book in this area -- one of additional indicators passed over (I have a bunch!), or going into greater depth on the indicators covered.

Who will benefit from this book?

You have to have a quantitative bent, at least to the level of being willing to go out and collect simple data in order to benefit here. Now, most serious investors do that, so I would say that serious investors can benefit from the "cook's tour" of market indicators that this book gives, unless they are so serious that they know all of these indicators. (Like me.)

I like this book very much because it is well-organized and covers all the important indicators that the pros look at. The author has divided the book into 3 important sections: (1) The first section deals with volatility, big money, fast money etc. and discusses how all these actions affects price in the market, (2) the second deals with market sentiments, and finally (3) smart vs. dumb money and why it's important to follow the smart money. I find this book to be extremely informative yet very readable. For me, the layout of the 3 sections helps serve as a base map for me to process the available information out there in a very organized way. It helps one to think "horizontally" across the investment market landscape and it helps me put other investment knowledge that I've picked up elsewhere in the proper location. Highly recommend.

Quite practical book about a number of indicators of the overall market, kind of towards predicting the equity market. The book is not encyclopedic, which is good. Book is organised by the objective of the indicator (e.g. sentiment, insiders). The author has made a good selection of indicators that complement each other quite well. For the practically inclined the book contains many references to webpages with useful in-depth information.

The book covers many interesting topics but there are too many. For example, on page 56, the text for figure4.5 is totally wrong. You can find many discrepancy between text and figures in this book. You either read the text or look at the chart, which may make some sense. Don't try to look at both together. The charts are copied from other sources. Assumed the text is not copied. Anyway it's not a fun to read this book. The good thing is the author does give the sources so you can read from sources.