My 10-Second Market Evaluation

It’s a basic technical chart that requires just a smidgen of interpretation.

The shaded portion represents the trend of the total stock market, as measured by VTI (Vanguard Total Stock Market ETF). And there are three moving averages, each represented by a line of a different color:

•The green line is a moving average for the last 50 days. When the green line is above the red and the red is above the purple, the market’s trend is probably bullish (upward).

• The red line is a moving average for the last 100 days

• The purple line is a moving average for the last 200 days. When the purple line is above the red line and the red is above the green, the market’s trend is probably bearish (trending downward).

Any other alignment of the green, red, and purple lines suggests a market dangerously driven by whipsaws (changes in direction).

• A crossover of the green line above either the red or purple is a hopeful early sign of an improving market.

• A crossover of the purple line over either the red or green is a bearish signal.

I’ve left the chart showing a range of the last five years (5y) of movement. You can click to change it to a more easily read chart by clicking a range of 3m (three months) or any of the other alternatives. I mostly use 3m and 5y.

Oh, and one last point: Such a chart can be used to evaluate the performance of a given mutual fund, ETF, or stock.

For an explanation of the term moving average, you can go to Investopedia.