What Good Is That?
Knowing if a market is moving up or down helps investors to buy only those issues that have the odds stacked in their favor. The bottom line in all markets, whether they are financial, real estate, or breakfast cereal, is that when demand is greater than supply, prices will rise. A chart with a positively sloped price line is exhibiting excess demand. It is better to buy a stock when demand is greater than supply than the other way around.
The chart of Micron Technology for 1995 and early 1996 illustrates this (see Figure 3.1). On the way up, when all the news was positive, buying high and selling higher was a good strategy. In late 1995, when the price had fallen 25 points, the chart shows prices bouncing back a bit. Certainly, ...
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