Signals from the Stock Market: Learning to Read What the Market Analysis Is Telling You

Every trading day, the stock market generates an enormous amount of information. Share prices move, companies release results, investors react to news, and market sentiment shifts. Individually, these events may seem random. Together, they create signals that can help investors better understand where opportunities and risks may be emerging.

We’ve previously discussed the three pillars of investment analysis: technical, fundamental, and sentiment analysis. Each approaches the market from a different angle, and each provides its own set of signals that investors can use to make more informed decisions.

None of these approaches is inherently better than the others. Instead, each forms an important part of the machine that is the financial markets.

This week marks the start of a new four-part series, where we’ll move beyond the theory and begin exploring the practical signals that each of these approaches provides. Rather than diving into the details immediately, we’ll first introduce the types of signals each pillar focuses on before unpacking them one by one over the coming weeks.

What does technical analysis look for?

Technical analysis is built on the idea that a share price reflects the collective expectations of market participants. Rather than asking why a share price has moved, it studies the movement itself.

Technical analysts look for signals that reveal the direction of a trend, changes in momentum, important price levels, shifts in trading activity, and patterns that have historically preceded significant moves. The underlying belief is that market behaviour often repeats itself because human behaviour tends to do the same.

These signals help answer one simple question: what is the market currently telling us through price action? Technical analysis is often used to improve the timing of investment decisions by identifying higher-probability entry and exit points. While it can be applied over any timeframe, it is most commonly associated with short- to medium-term trading.

What does fundamental analysis look for?

Fundamental analysis shifts the focus away from the share price and onto the business itself. It asks whether a company is becoming stronger or weaker and whether its current share price reflects its true value.

The signals here come from financial performance, company quality, management decisions, valuation, and the broader economic environment in which the business operates. Together, these provide insight into a company’s long-term prospects and whether it appears attractively priced relative to its underlying fundamentals.

Rather than focusing on short-term price movements, fundamental analysis seeks to determine what a business is worth and how that value may change over time. It is widely accepted that company fundamentals are the primary driver of long-term share prices, making this approach especially valuable for long-term investors.

However, market prices do not always reflect intrinsic value. As economist John Maynard Keynes famously observed, “The market can stay irrational longer than you can remain solvent.” In other words, prices and fundamentals can remain disconnected for far longer than many investors expect.

What does sentiment analysis look for?

Sentiment analysis recognises that markets are driven by people, and people are not always rational. Fear, greed, confidence, and uncertainty all influence investment decisions, often causing prices to move further in either direction than fundamentals alone would suggest.

Sentiment signals attempt to measure how bullish or bearish investors have become. They examine how the broader market is behaving, how investors are positioning themselves, and whether expectations have become too optimistic or too pessimistic.

This helps explain why markets sometimes react in ways that appear counterintuitive. A company may report positive results, yet its share price falls because investors were expecting even better news. In markets, expectations often matter just as much as the headline numbers.

Over the next three weeks, we’ll explore each of these pillars in much greater detail. We’ll examine the signals experienced investors monitor, explain what those signals mean, and show how they can be combined to build a clearer picture of where the market may be heading. We’ll also point you towards several free resources that you can use to find and interpret these signals yourself.