This Simple Indicator Could Spell Disaster in the Stock Market

n the 15 years I have been trading the financial markets, I have utilized a plethora of indicators, everything from drawing simple moving averages on charts to finding the correlation between two or more assets, to find an early warning for a rally or sell-off.

The truth is that there is no one magic bullet for timing the market, but at the same time, one simple indicator can be an excellent gauge for market sentiment and short-term changes in financial market direction.

Stock Volume

A good majority of the "tools" used by many technical analysts are based on stock volume or a combination of price and volume together. If you didn't know, a "technical analyst" is one who looks at the price charts of stocks (along with volume and other indicators) to find levels of support and resistance and find trends in a stock's price.

You can take stock volume data and crunch it, combine it with price, look at upticks and downticks and come up with some really complex formulas. Now, I am not going to say that I am not a believer in some of the more complex volume-related indicators, but just like we do at Smart Investing Daily, I will focus on a simple, overlooked indicator that's giving us a strong signal in the S&P 500. More on that in a minute.

We often fail to notice what is staring us right in the face because deep down, we think it can't be that easy.

A friend of mine used to say, "Volume is the cause, and price is the effect." He couldn't have said it better. Until someone actually steps in and buys or sells a share of stock, a trade can't be made and price will NOT really change. (more)