A major news event or the release of a key economic indicator can trigger such a reversal.
However, there are times when the market will reverse itself for no obvious reason.
If you knew a reversal might be approaching, you could take advantage of the shift and make a profit.
There is no magic number or indicator that will tell you what the market is going to do in the future.
However, you can keep an eye on certain key metrics for a clue that change is in the wind.
One of the most popular is the TIKI (symbol: $TIKI).
The measurement looks at the 30 stocks of the Dow Jones Industrial Average (the Dow) and measures the number of Dow stocks rising and the number of Dow stocks that are falling.
The resulting number tells you whether there are more stocks rising (upticking) or falling (downticking).
You calculate the TIKI by taking the upticking stocks and subtracting the downticking stocks of the Dow.
When the result in a high positive or a high negative you can expect a change in market sentiment, which often translates into rising or declining prices.
For example, if on a given day there are 18 stocks upticking and 12 downticking, the TIKI would be 6 which is not a strong number that might indicate a direction prices were headed.
However, if there are 26 stocks upticking and 4 downticking (giving a TIKI of 22), you can expect prices to rise in the broader markets.
You can find the TIKI on charting software sites and through some brokerage sites, especially those favoring technical analysis.
Read more about:
Market Internals and other indicators:
The TRIN and TRIN/Q
The TICK
The VIX
