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Part 2: The New Laws > Market Indicators

Chapter 9. Market Indicators

Many traditional market indicators are becoming less reliable.

Since ancient times, travelers have relied on a variety of signals to guide them on their journeys. At night, mariners used the stars to make their way forward; during the day, nomads kept an eye out for landmarks that would ensure they were on course. In similar fashion, stock market players have traditionally monitored a variety of indicators to assess the future direction of share prices. Fundamentally oriented investors have focused on PE ratios, dividend yields, and growth rates to formulate their views; technical analysts have scrutinized price trends, chart patterns, and sentiment measures to gauge what might happen next. Experienced operators would often take both kinds into account, looking for one to confirm the other. In the modern share-trading environment, however, it appears that some traditional guideposts—as Figure 9.1 seems to indicate—are no longer as reliable as they once were. Consequently, those who continue to believe otherwise risk being stranded in the investment wilderness.


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