- A -
ADR (American Depository Receipt): A negotiable certificate issued by a U.S. bank in place of one or more shares of foreign corporations held in trust by the bank. ADRs are traded on U.S. exchanges and facilitate the trading of foreign stocks by domestic investors.

A/D Divergence Index: A proprietary indicator developed by InvesTech which shows the percent difference between the actual S&P 500 Index and the "expected" S&P 500 Index based on historical breadth. Unlike other breadth gauges, this model is not distorted by temporary weakness or strength in the A-D Line. InvesTech monitors this A/D Divergence Index to reveal when breadth or participation is deteriorating to the level at which a bear market normally begins. (See Advance-Decline Line.)

Advance/Decline Ratio: Calculated by dividing the number of advancing stocks by the number of declining stocks on a given day, normally using a moving average. Also referred to as the Overbought/Oversold Index on Wall Street.

Advancing or declining volume: Advancing volume is the total number of shares traded in only the stocks which advanced during the day; conversely for declining volume. Used primarily in momentum indicators.

Advisory Sentiment Index: Compares the percentage of investment advisors who are bearish to those who are bullish. A contrarian indicator, since the market is most likely to reverse direction upward when the greatest number of advisors are bearish; and market tops typically occur when bullishness is widespread.

American Stock Exchange (AMEX): Approximately 800 issues, primarily oil stocks, are traded on the AMEX.

Arbitrage: Simultaneous purchase and sale of stock, stock options, and/or stock index futures in order to profit from price discrepancies or interest income. This activity has become so widespread among specialists and institutions that some of the more common sentiment indicators have likely lost their validity.

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Banker's acceptances: Short-term notes (promises) to pay a specified amount to "accepting" banks. Banker's acceptances are generally drawn (made) by importers and exporters and used to finance international trade. These negotiable instruments are often bought and held by money market funds who consider them a very safe investment because they're backed by the accepting bank (which is obligated to make payment at maturity), as well as the originator of the draft.

Bear: See bull/bear market.

Bellwether stocks: Stocks or industries that purportedly have the capability of predicting broad market action by the movement in their own prices (i.e., Merrill Lynch, General Motors, IBM).

Beta: A measurement of a stock's volatility relative to the market in general. A beta of 1.00 means that a stock has traditionally matched the market's swings. A high beta indicates greater profitability from a stock in a bull market, but higher risk in a bear market.

Bid/asked price: In the over-the-counter market, the bid price is what a dealer or potential purchaser is willing to pay for at least 100 shares of stock, while the asked or offer price is the price "asked for" by a current holder of the stock.

Block or block trade: A large trade consisting of over 10,000 shares of stock.

Blue chip: A stock of high investment quality that has been issued by a large well-established company and enjoys public confidence in its worth and stability.

Bond Advanced Risk Index: A proprietary indicator developed by InvesTech to evaluate the long-term investment climate for bonds. One of the major components of this index is based on inflationary pressures, which have historically proven the most common trigger of higher interest rates and tumbling bond prices.

Bond Barometer: A composite timing model developed by InvesTech which reveals whether the climate is favorable or unfavorable for holding bonds or bond income funds. Ranges between +100 and -100.

Bond market: Similar to the stock market, an exchange where corporations (and the Federal government) can raise capital by selling interest-bearing notes. Bond prices are extremely sensitive to interest rates and inflationary fears. Thus, falling bond prices are perceived to lead stocks downward.

Bondo Grande: A bond timing index formulated by Ned Davis Research for determining how heavily to invest (0-100%) in the bond market. Compiled from over 70 bond timing models, this index is often reviewed within the issues of InvesTech.

Book value: The total shareholder equity (or net assets) of a corporation divided by the number of shares outstanding. Often used to judge whether a stock is overvalued or undervalued.

Breadth: Relates to the number of stocks taking part in a market move. A market advance with a large number of stocks participating is healthier (and more likely to continue) than an advance in which few stocks are taking part. Breadth indicators are usually the earliest indicator of market weakness; but often lag at market bottoms. (See Advance-Decline Line, Breadth Disparity Index.)

Breadth Disparity Index: A sophisticated indicator developed by InvesTech which uses advanced calculus to determine the differential velocity of market breadth relative to price movement. In simple terms, this reliable index usually provides 2-3 months of advance warning before a severe market decline. (See Breadth.)

Bull/bear market: Indicating that the market is in a long-term uptrend or long-term downtrend respectively.

Buying volume: Used by InvesTech to refer to the general desire of investors to purchase additional stock.

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Call option: See put/call option.

Capacity Utilization: The current operating rate at the nation's factories, expressed as a percentage of their maximum capacity under ideal conditions. Rising Capacity Utilization is closely watched by the Federal Reserve as an advance warning of impending inflation, since companies must increase prices to cover the expense of bringing new manufacturing facilities on line.

CBOE Call/Put Ratio: The ratio of the daily volume of calls to puts on the Chicago Board Options Exchange. A contrarian indicator based on the concept that options traders are usually wrong near critical turning points. High readings are bearish, and low readings are bullish.

CD rate, 90 day: The interest rate paid by banks on 90 day certificates of deposit. (See Federal Funds rate.)

Closed-end fund: An investment fund which specializes in stocks or bonds, but whose price is not solely dependent upon the true assets of the fund. Because the fund has a fixed capitalization (number of shares which are traded on a stock exchange), share price is determined by supply and demand and will often trade at a premium or discount to the value of the stocks owned by the fund.

COMEX: Commodity Exchange of New York – where commodity futures are traded on the precious metals and industrial metals.

Commercial paper: Short-term negotiable debt instruments sold by corporations to the public. Reported weekly, it is a good indication of business credit demand.

Consumer Confidence Index: An index based on a representative sampling of 5,000 households, compiled monthly by the Conference Board and used to predict the future health of the U.S. economy. The index is a weighted average of two separate components: 40% current expectations and 60% future expectations.

Consumer Credit: A monthly release indicating short-term loan demand by the public.

Consumer Price Index (CPI): Measures the change in the cost of goods and services (housing, food/beverage, transportation, apparel, medical care, and entertainment) purchased by a typical wage earner. Reported monthly by the Labor Department and often referred to as the "consumer inflation rate."

Consumer Sentiment Index: Compiled from a nationwide survey of consumers by the University of Michigan, this index measures consumers' current and future expectations for financial and business conditions and is designed to detect changes in consumer psychology and by extension, the economy.

Coppock Guide: Originally developed by Edwin S. Coppock in the 1950s as a "barometer of the market's emotional state." Recognized for its accurate historical track record in signaling the best, low-risk buying opportunities - although it is not noted for timely sell signals. Monitored regularly by InvesTech as one of the key confirmations of a new bull market.

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Date of declaration/payment/record: In stock splits and dividend or capital gains payments, the date of declaration is the date that the impending action is announced by the company. The date of record determines which stockholders will take part in the transaction, while the payment date is the actual distribution date.

DAX: The major market average traded on the German Frankfurt exchange.

Debt-to-Equity Ratio: The ratio of a corporation's total debt to shareholder equity (number of shares times value per share). This figure is one means of evaluating a company's underlying value or long-term liquidity.

Deferred sales charge: See redemption fee.

Derivatives: Any of a number of investment instruments which derive value from an underlying security. Examples include options, futures, stripped bonds, and different types of structured notes. Derivatives are widely used by institutions to manage risk, but actually increase risk if used inappropriately.

Discount rate: The interest rate which member banks must pay to borrow funds directly from the Federal Reserve (as opposed to the Federal Funds rate).

Disparity: The degree of nonconfirmation by an indicator with respect to the market's movement; i.e., the failure of the Advance-Decline Line to reach a new high while the DJIA hits a new high.

Dividends: Corporate earnings which are distributed to individual stockholders.

Dow Jones Industrial Average (DJIA): A price-weighted market index composed of 30 major NYSE-listed corporations. Often criticized for containing too few issues.

Dow Jones Transportation Average (DJTA): A stock market index composed of 20 major NYSE-listed transportation stocks.

Dow Jones 20 Bond Average: A corporate bond gauge compiled by Dow Jones & Company, consisting of 10 industrial and 10 utility bonds – with ratings from AAA to BBB and a wide range in maturity dates. Prior to 1976, this average was calculated using 40 bonds.

Dow Jones Utility Average (DJUA): A market index composed of 15 major NYSE-listed utility stocks.

Downside volume: See advancing or declining volume.

Dow Theory: A set of criteria developed around 1900 by Charles H. Dow which utilizes the DJIA and DJTA to identify the current major trend of the market.

Durable Goods Orders: Monthly statistic released by the Commerce Department, reporting new orders received by manufacturers for goods having a useful life exceeding three years (appliances, autos, etc).

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Econometric model: An economic/stock market forecasting model developed by applying mathematics and statistics to economic and financial trends.

Emerging Markets: Generally thought of as Second or Third-World countries whose stock markets possess greater profit potential due to higher economic growth rates. Emerging markets are accompanied by correspondingly greater market and currency risk.

Eurocurrencies: Deposits of a currency held in banks outside the country which originally issued it, yet paid interest based on prevailing rates in the home country.

Eurodollars: U.S. currency deposits held in banks outside the United States. (See Eurocurrencies.)

Ex-dividend: A stock is listed as ex-dividend when new purchasers are not eligible for a dividend which has been announced but not yet paid.

Expense ratio: The yearly percentage of a mutual fund's total assets which are used to pay administrative, management, and distribution (12b-1) expenses. Industry average is approximately 1.5% for growth funds and 1.2% for income funds.

Exponential moving average: A simplified (yet quite accurate) method of calculating a moving average using only the current day's value and the previous day's moving average.

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Federal Funds rate: The interest rate which banks must pay to borrow from other member banks of the Federal Reserve system. The Federal Funds rate and the 90 day T-bill rate, are the best indication of the direction of short-term interest rates and usually lead the more commonly followed "prime rate."

Federal Reserve System: Established by the Federal Reserve Act of 1913 as the national banking system independent of government control. Composed of 12 major district banks with 80% of all banks as members. The Federal Reserve has the responsibility of controlling monetary policy with the power to supply (print) money or drain funds from the banking system.

Financial futures: That portion of the commodities market which refers to the trading of T-bill, T-bond, and GNMA (Government National Mortgage Association or Ginnie Mae) contracts... all of which are extremely sensitive to interest rates.

Flat: See long/short/flat.

F.O.M.C. (Federal Open Market Committee): The decision-making arm of the Federal Reserve, consisting of seven Federal Reserve Board members (Presidentially appointed), the president of the Federal Reserve Bank of New York, and four other Reserve bank presidents (selected in rotation from the remaining 11 district banks).

FTSE 100 Shares: A major market average of 100 stocks traded on the London exchange.

Fundamental analysis: Analysis and prediction of the stock market (or individual stocks) based upon the evaluation of current or past economic and business statistics. A very lagging (and therefore misleading) means of forecasting market trends. Future Inflation Gauge (FIG): A leading model developed by the Economic Cycle Research Institute (ECRI) that is used to forecast the future trend of inflation. The FIG is comprised of 8 components, including: NAPM vendor performance, import prices, industrial material prices, real estate loans, total debt, civilian employment rate, insured unemployment rate, and the yield spread.

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Gross Domestic Product (GDP): The dollar value of the final output of all goods and services produced in the U.S. in one year (replaces GNP, which measured output produced by the U.S. throughout the world). Nominal GDP is expressed in current dollars and includes the effects of inflation; while real (or constant dollar) GDP is adjusted to exclude the impact of inflated prices since the base year – currently 1996.

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Hang Seng Index: Primary stock market index of the country of Hong Kong.

Hedging: Protecting against a possible investment loss by a counter-balancing transaction. For example, an investor who owns stock which he does not wish to sell (because of tax considerations, or impending dividend, etc.), can protect against a temporary drop in that stock by purchasing a corresponding put option which would increase in value as the stock price fell.

Hidden load (12b-1): An annual fee of up to 1.00% charged by mutual funds for marketing expenses to attract new investors, this fee (also called a distribution fee) is charged by an increasing number of mutual funds.

Highs/lows: "New highs" refers to the total number of stocks which have traded up to hit a new 52-week high on a given day; vice versa for "new lows." High/low figures can be used as an indication of market leadership.

Housing Starts: An excellent indicator of long-term conumer confidence as it measures consumers willingness to make a multi-year mortgage commitment for construction of new homes. As such, its decline is often one of the earliest warning flags of a probable recession.

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Initial Claims for Unemployment: A weekly report of new unemployment claims compiled by the Labor Department from data collected from each of the states and Washington DC.

Initial Public Offering (IPO): See New Issue.

Insider buying/selling: Buying or selling of corporate stock by the officers of a company must be reported to the SEC; and is sometimes an excellent indication of future earnings by those who should know.

Institutions: A generic term referring to the 75% of trading which is conducted by large portfolio managers (i.e., mutual funds, pension funds, etc.).

Intermediate-term: See short/intermediate/long-term.

International Monetary Fund (IMF): An international organization to which all nations may contribute, and from which any nation may borrow to support the value of its currency or encourage development within its country. The IMF was created in 1944 to stabilize the international currency market, lower trade barriers, and induce post-war recovery.

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January Barometer: A Wall Street phenomenon (approximately 69% accurate over 60 years) in which the stock market's performance during January is a precursor of the market's performance for the remainder of the year. (See Seasonality.)

Junk bonds: High-yield corporate bonds which are considered high-risk due to the increased probability of a default by the issuer, and are rated BB or lower by Moody's Rating Service.

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Leadership: Leadership is indicated by the quantity and quality of stocks leading the market in a particular direction – usually a prerequisite for a trend to continue (see highs/lows).

Leadership Index: An indicator that InvesTech uses to gauge bullish versus bearish leadership, it serves as a strong confirmation of the primary market trend and ranges between a very favorable +100 and a bearish -100.

Leading Economic Indicators (National Bureau of Economic Research Short List): Consists of select statistics which are used to hypothetically forecast the nation's future economic health. They are:

Business Vitality - Index of net business formations.

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Management fee: A fee charged to compensate the manager of a mutual fund (load or no-load) or other managed account. Usually a fixed annual percentage (between .25% and 1%) of assets under management.

Margin: Investment capital which is borrowed from a brokerage firm to purchase additional stock or mutual funds. Up to 50% of an investor's account equity may be used as collateral, and interest is charged by the broker on these borrowed funds.

Margin call: A notice sent to clients who have purchased stock "on margin," when their account balance drops below the minimum margin requirements due to falling stock prices. The investor must either "meet" the margin call by supplying additional funds, or sell the stock which was purchased on margin.

Margin Debt: The sum total owed to NYSE member firms by customers who have borrowed money in margin accounts to finance stock purchases.

MEP: See Monetary Exposure Profile.

Merchandise Trade Balance: The net difference between U.S. exports and imports, leaving either a surplus (when exports exceed imports) or a deficit (when imports exceed exports).

Momentum: Refers to the probability that once a trend is in progress, it will remain in effect – the stronger the trend, the greater its likelihood of continuing.

Monetary: Variables such as interest rates, credit demand, or liquidity which the Federal Reserve attempts to control through its regulation of the banking system. Monetary factors are usually a precursor of future stock prices and economic conditions.

Monetary base: The total "money" (credit, gold stock, etc.) made available to the banking system by the Federal Reserve to finance consumer and business borrowing.

Monetary Exposure Profile (MEP): An indicator developed by InvesTech which determines whether the monetary environment (as controlled by the Federal Reserve) is favorable or unfavorable for the stock market. Ranges between +100 and -100.

Monetary targets: The money supply growth targets set by the Federal Reserve usually expressed as a range of percent growth; i.e., 6% to 8% (see money supply).

Money market fund: An investment fund which provides a relatively secure interest income by investing only in high-grade money market instruments (T-bills, banker's acceptances, certificates of deposit, or commercial paper). Often used by investors for excess capital not currently invested in the stock or bond market.

Money supply: Measure of various forms of publicly held money:

M1 Currency + demand deposits (i.e., checking accounts).

- N -
NASDAQ National Market System: NASDAQ (National Association of Securities Dealers Automated Quotation System) is a computerized pricing system which determines bid and asked prices for actively traded stocks in the over-the-counter market.

NASDAQ OTC Composite Index: A capitalization-weighted market index composed of all domestic companies listed on the National over-the-counter market.

NAPM Purchasing Managers Index: A U.S. Department of Commerce index based on a monthly survey of the National Association of Purchasing Management. Members (major corporations) often reflect early economic trends in employment, production, and prices. A reading above 50% confirms a growing expansion, while figures below 50% indicate a contracting economy.

NAV (net asset value): Pertaining to mutual funds quotes, the NAV represents the total net assets of the fund divided by the number of shares outstanding. This is usually the fund's purchase price (except in the case of a "load fund" which adds a sales or redemption fee to the NAV).

Negative Leadership Composite: A proprietary indicator developed by InvesTech to track internal market leadership. A SELLING VACUUM (without any downside or negative leadership) is always triggered in the early stages of a long-term market advance. Conversely, when an increasing number of stocks are dropping to new yearly lows, this index enters the DISTRIBUTION ZONE where the stock market is most vulnerable.

Net free reserves: A measure of banking liquidity calculated by subtracting the banking system's legally required reserves and borrowings (through the Federal Reserve system) from their total cash reserves.

New issue: The initial offering of stock to the public by a corporation or its founders to raise capital for growth.

New York Stock Exchange Composite (NYSE): A capitalization-weighted market index composed of all corporations traded on the New York Stock Exchange. Often preferred by analysts over the DJIA for its broader base.

Nikkei 225 Index: The major market average traded on the Japanese Tokyo exchange.

No-load mutual fund: A mutual fund which charges no commissions or sales/redemption fees to execute transactions. As with load funds, an internal management fee (and often a 12b-1 distribution fee) is charged directly to the fund.

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Odd lot: Purchase or sale of a block of stock consisting of fewer than 100 shares.

Odd lot shorts: Short sales of fewer than 100 shares made by small (supposedly unsophisticated) investors.

OEX: An option on the capitalization-weighted S&P 100 Index, referred to by its ticker symbol, OEX.

Option: See put/call option.

Oscillator: A short-term timing indicator that fluctuates about a neutral axis – between an oversold (bullish) condition and an overbought (bearish) condition.

OTC: Over-the-counter market. Unlike other exchanges, where trading is conducted in one physical location, the OTC market trades via telephone and computerized negotiations between buyers and sellers. A new issue is usually listed first on one of the regional OTC markets. Then, as the corporation grows and its trading volume expands, the stock moves to the National OTC market before advancing to the NYSE.

Overbought: A market condition in which stock prices have risen too rapidly, with too much volume flowing into too few stocks. The more overbought a market becomes, the higher the probability that it will level off to digest its recent rise, or experience a temporary correction.

Oversold: A market condition in which stock prices have declined too quickly, with too much volume flowing into too few stocks. The more oversold a market becomes, the greater the probability that it will temporarily level off or bounce upward.

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Perpetual futures contract: A hypothetical commodity futures contract with a floating expiration date, which permits a comparison of long-term commodity trends. For example, today's value of a 3-month perpetual contract would be calculated by prorating the premium on a nearby futures contract with the premium on a contract that expires in four or more months.

Preferred stock: Stock given priority over common stock in the payment of dividends and/or distribution of assets.

Premium: In the case of stock index futures or options, the difference between the current futures or options price and the actual cash value at expiration if the underlying commodity or stock doesn't change in value. The premium is usually considered the "expense" for controlling a leveraged investment with a limited amount of capital.

Pressure Factor (PF): A short-term timing model developed by InvesTech which utilizes three individual oscillators: an inverse variation of TRIN, a volume ratio oscillator, and a price oscillator.

Price/Book Value Ratio: A fundamental measure of stock valuation that is calculated by dividing the price of a stock (or index) by the net value of its per share corporate assets.

Price/Dividend Ratio: A fundamental measure of stock valuation that is calculated by dividing the price of a stock or index by its latest 12-month dividends per share. A very high reading relative to historical norms means that investors are willing to pay more in expectation of future earnings and dividend growth. It also often implies the stock (or index) is overpriced or expensive, and therefore carries a higher degree of risk.

Price/Earnings Ratio (P/E): A fundamental measure of stock valuation that is calculate by dividing the price of a stock or index by its latest 12-month earnings per share.

Prime rate: The interest rate that banks charge their most credit-worthy customers. The prime rate is a poor monetary indicator, as it usually lags other key rates (see Federal Funds or T-bill rate).

Producer Price Index (PPI): Measures the cost of goods and resources (food, capital equipment, energy, etc.) purchased by a typical manufacturer. Reported monthly by the Labor Department, it is considered a leading indicator of the Consumer Price Index (CPI) or inflation rate.

Program buying/selling: Refers to the numerous arbitrage-related programs which institutions trade with the use of extensive computer analysis. Often blamed for the increased day-to-day volatility in the stock market.

Protective stop: A means of limiting potential losses or locking-in profits by pre-selecting a price at which a stock position will be exited if it falls. In the case of over-the-counter stocks and mutual funds where an actual stop cannot be placed as an order, a "mental stop" should be used. When the stock nears its mental stop, it must be monitored closely for a possible exit.

Public (or Non-Member)/Specialist Short Ratio: An indicator which supposedly measures the amount of short-selling by "ill-informed" investors (the public) with respect to short-selling performed by sophisticated specialists. Distorted by today's arbitrage trading.

Put/call option: An option to buy (or sell) common stock at a specified price ("strike" price) within a given amount of time (expiration date). Put options are purchased in anticipation of the price of the stock falling, while call options are purchased in expectation of higher prices.

Put/Call Premium Ratio: Developed by Bob Nurock (The Astute Investor) as a sentiment gauge to measure excessive optimism (< 40) or widespread pessimism (> 125). Compares the average premium on all listed put options to the average premium on all listed call options.

Put/Call Volume Ratio: Developed by Perry Wysong (Consensus of Insiders) as a sentiment gauge to measure excessive optimism (< 10) or widespread pessimism (> 100). A ratio of 40 means that $.40 is changing hands in puts for every $1.00 traded in calls.

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Random walk theory: The ill-conceived concept that the market outlook cannot be determined based on current knowledge or statistics; and that a stock's future price is totally unrelated to past price movements.

Redemption fee: A charge of up to 6% levied by some mutual funds, and collected only when you sell the fund. This fee is often contingent on the length of time the investment is held, and is not charged by true no-load funds.

REIT (Real Estate Investment Trust): An investment group, closed-end fund, or stock which pools funds for the purpose of investing in real-estate related areas.

Relative strength: Measures a stock (or stock group's) current performance relative to other stocks (or groups). Often indicative of potential future performance.

Repurchase agreement (repo): An increasingly popular transaction whereby securities of the U.S. government or a federal agency are sold with a simultaneous agreement (by the seller) to repurchase the securities at a later date (usually 2-4 days). Used by the Federal Reserve to inject funds into the banking system to temporarily reduce (or hold down) the Federal Funds rate, a "system repo" is carried out with several banks, while a "customer repo" involves a single bank. Repurchase agreements are also used as short-term investments by money market funds.

Reserve requirements: The minimum cash reserve level which all Federal Reserve member banks must carry as "insurance" against non-performing loans or defaults. Established by the Federal Open Market Committee (F.O.M.C.) of the Federal Reserve.

Resistance level: See support/resistance level.

Risk Adjusted Return: Published by the Hulbert Financial Digest for leading stock and mutual fund newsletters, this performance measure compares a portfolio's return to the Wilshire 5000 after the "riskless" return of T-bills has been subtracted. It also incorporates a volatility measure which looks at the monthly fluctuation of a portfolio's return (the less the return varies, the less risk).

Risk Allocation Strategy: The strategy employed by InvesTech Research in its model stock and mutual fund portfolios, whereby the investment position is gradually increased or decreased based on market risk as measured by key indicators. Money market funds or T-bills are used as a temporary parking place for investment capital until the market environment again becomes favorable.

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S&P 500 Futures Premium: A short-term indicator of trader overconfidence or pessimism which InvesTech calculates by subtracting the current price of the S&P 500 Index from the price of a 3-month perpetual contract on the S&P 500 Index.

S&P 500 (Standard & Poor's 500 Index): A capitalization-weighted index composed of 400 industrial, 40 public utilities, 40 financial, and 20 transportation companies, the S&P 500 represents approximately 80% of the value of all stocks traded on the NYSE. Based on 200 issues at inception in 1917, the index was expanded to 500 issues in 1957, and is included as one of the Commerce Department's 12 Leading Economic Indicators.

Seasonality: The tendency of stock prices to react favorably during certain times of the year. Most notable are the two days prior to each major holiday, and the period between mid-December and mid-January.

Secondary stocks: Small high-growth companies which are usually listed on the various OTC exchanges, they are often considered higher-risk investments due to the lack of an established sales/earnings record.

Sentiment: Sentiment indicators attempt to measure the extremes in investors emotions or confidence. Used as a contrary indicator, since optimism is greatest near market tops and pessimism is widespread near market bottoms. (See Short Interest Ratio, Advisory Sentiment Index, and Public/Specialist Ratio.)

Short Interest Ratio: A sentiment indicator calculated by dividing the total number of shares that have been sold short on the New York Stock Exchange (or AMEX) by the average daily trading volume. A high SIR (above 1.75) is normally considered bullish, and a low SIR (under 1.00), bearish. Severely distorted during recent years by institutional arbitrage activity.

Short/intermediate/long-term: Referring to the relative length of time an investor normally holds or maintains a stock position. Short – within the next 4 weeks; intermediate – from 1 to 6 months; long – greater than 6 months.

Short-selling: The practice of selling borrowed stock with the objective of repurchasing it at a profit, after its price has declined.

Singapore Straits Times Index: The index for Singapore's stock market. The Straits Times and Hang Seng Indexes are considered to be the primary emerging markets of the Far East.

Soft Landing: A term used by the financial media to describe a cooling of the economy sufficient to quell inflation and interest rates without triggering a recession.

Specialist: A professional investor on the floor of the New York Stock Exchange whose role is to balance incoming buy and sell orders and maintain liquidity to create fair prices in the stocks in which he specializes.

Speculation: A trader's willingness to assume above average "risk of loss" in return for above average "potential for profit."

Split: A stock split increases the number of shares outstanding for a particular company, while decreasing the stock's price by an equal amount. Stock splits DO NOT affect an investor's profit or loss in the stock, but make the stock more affordable to the general investing public.

Spot Price Index (Spot Raw Materials Prices): A daily index comprised of 13 commodities, compiled by the Commodity Research Bureau. This index is a good measure of inflation at the earliest stages of production.

Spread: The price difference between the bid and asked price in OTC quotes. It may also refer to an option-hedging strategy in which an investor has taken contrary positions in the same underlying stock simultaneously but with different strike prices or expiration dates.

Standard Deviation: A statistical measure using historical performance to predict a range of future results in individual securities or a portfolio. The wider the range of probable performance, the higher the risk.

Stock index futures: A very speculative means of investing in the stock market using a highly leveraged contract which is traded on the commodities exchanges (not for the faint-of-heart).

Stopped out: A term used to describe the completion (exiting) of a trade or stock position when a "protective stop" has been hit.

Summer Rally: A popular Wall Street truism which contends that the summer months provide a seasonal advantage for stock market gains over other months of the year. Research conducted by InvesTech has disproved the existence of a summer rally.

Support/resistance level: A "support" level is established under a stock's price as it advances upward; and conversely, a "resistance" level is established above the stock's price when it bounces lower in a downtrend. In either case, these levels represent important price barriers which the stock has been unable to penetrate after a number of consecutive attempts.

- T -
T-bill rate, 90 day: The interest rate paid by the Federal government on 90 day Treasury bills to help finance the short-term portion of the Federal deficit see Federal Funds rate).

Technical analysis: The science (and art) of predicting future market trends and stock price movements through analysis of market statistics, monetary conditions, price patterns, as well as sentiment indicators.

TICK: The net number of stocks on the NYSE whose latest change was up or down. For example, a TICK of +500 means that out of the total NYSE stocks traded, 500 more traded on an uptick (moved higher) than traded down. Sometimes thought of as an instantaneous reading of "advances minus declines," the TICK can be a strong indication of market direction during the next few hours.

Trade-weighted dollar: A comparison of the U.S. Dollar against a basket of foreign currencies, with the weight of each of those currencies depending on the amount of trade which that country transacts with the United States.

Trend-line (200-day): A 200-day moving average of a stock's price or market index is often compared with its current price to indicate the long-term trend. It may act as a resistance level for a declining stock, or a support level for an advancing stock.

TRIN: Calculated by dividing the ratio of advancing to declining stocks by the ratio of advancing to declining volume: (A/D)/(+V/-V). Available on most brokerage quote machines, TRIN readings are considered to be bullish if under 1.0 and bearish if above 1.0. Also known as the Short-Term Trading Index or the Arms Index (after its inventor, Richard Arms). A 10-day moving average is often used for smoothing.

- U -
Unweighted Indexes: Market indexes which give equal weight to all the stocks on an exchange. Unweighted indexes are believed do a better job of reflecting the price fluctuations of the majority of stocks traded on an exchange than price or capitalization-weighted indexes. Some examples are the Indicator Digest Average, The Zweig Unweighted Price Index, and the Value Line Index.

Upside volume: See advancing volume.

- V -
Value Line Index: An unweighted index of all the approximately 1700 stocks covered in the Value Line Investment Survey.

Volatility: The increased tendency of a market (or stock) to change price very rapidly. A more volatile stock will usually rise faster in an advancing market while falling further in a declining market (see beta).

Volume flow: A term used to describe the degree to which net advancing volume (advancing volume minus declining volume) is "flowing" into net advancing stocks.

- W -
Wage Inflation Pressures: An InvesTech proprietary indicator which tracks unemployment to provide advance warning of inflationary pressures within the labor market.

Warrant: A certificate entitling the holder the right to purchase securities within a specific time period at a specific price. A warrant is similar to an option, but generally has a longer life and is often sold upon the new issue of a stock.

Wilshire 5000 Index: A broad-based index representing the dollar market value of all stocks traded on the New York and American Stock Exchanges, plus all actively traded over-the-counter stocks. The index is capitalization-weighted.

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Year-end Rally (Santa Claus Rally): A historic phenomenon (approximately 75% accurate) whereby the market usually moves higher during the weeks before and after Christmas. (See Seasonality.)

Yield: The dividends or interest paid by an investment such as a stock, mutual fund, or T-bond. In the case of stocks, the yield is expressed as a percentage of its current price.

Yield curve: A graphic comparison between the yields on short-term and long-term deposits or money market instruments. A positive yield curve is one where long-term rates are higher than short-term rates, and indicates a normal relationship which is healthy for economic growth. A flat or inverted yield curve is indicative of tight money or rising inflation – and is usually a precursor of a slowing economy.

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Zero coupon bond: A particular type of bond which is sold at a steep discount from face value, then appreciates until maturity (in lieu of periodic interest payments). The gain is taxable as accrued, even though there are no actual interest disbursements.