There are a few ways to predict the stock market including factual data related to earnings and economic factors. Recessions and downswings can often help you decide that the stock market will go down. And in times of prosperity, you might see what seem like unending rises in certain sectors. By looking at past performance and how the market is affected by these events, you can predict the way the stock market will move in a given day.

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Earnings and Multiples Estimates

Estimate the earnings of a company to see whether its stock will rise or fall during the year. A company’s ability to make money for its stockholders is the best way to determine whether the stock will be successful. If the company is in an industry that will be affected by a downturn, you could predict that the stock will go down. You can estimate the success of many companies to gauge whether the stock market as a whole will go down or up at any given time.

Use the earnings estimates to come up with a P/E ratio. This multiple ratio will let you know how much an investor is willing to pay for the earnings. Multiply each P/E ratio times the earnings estimates to get the value of the company as it relates to the stock market. If the earnings estimate is $60 and the P/E ratio is 20, the investor is willing to pay 20 times earnings, or $1,200.

Trends and Economic Factors

Look at the current stock market trends and those from the past. You can use trend analysis to predict future stock market moves. If the stock market traditionally moves up or down during a certain period in the year, you can use that information to make some predictions. You must analyze the economic conditions during those periods as well to predict accurately. If the stock market went up in a certain period and we are in the same economic condition a year later, you can use that to predict a similar stock market fluctuation.

Consider current economic factors regardless of trends. If we are in a recession that is predicted to last a long time, you can predict that the stock market will go down until there is a sufficient recovery. Conversely, if we are emerging from a recession, stocks will start to climb as consumer confidence and spending grow.

Use the news of the major players in a certain index. If the sector that contains the heaviest hitters in an index has trouble with a product or a recall, you can predict that the event will cause the index to go down very soon.