Secrets to Using the Map of the Market

The market at a glance
Experienced traders know that each market session has a distinct personality. A quick scan of the map is an excellent way get a read on the character of the current trading day, as these thumbnail pictures illustrate. Because the map displays data on so many companies simultaneously, it gives you a sense of the breadth and variation in the market that's impossible to capture in an index.

How the map is made
Before discussing techniques for analyzing the map, it's useful to know how it was constructed. The display shows approximately 600 publicly traded companies (chosen by SmartMoney.com editors for their importance or interest) grouped by sector and industry. Within each industry the layout is designed so that neighboring companies have historically had similar stock price movements. That arrangement gives the map a powerful capacity to reveal regularities in the market's movement, with trends appearing as distinctive patterns of light and dark.

Clues to the news
To illustrate how to interpret these patterns, we'll take a sample day, Dec. 29, 1998, whose thumbnail you saw above, and examine some of the ways the map could have guided your research into the news driving that day's trading.

A good first step is to look for any visually striking features. On the thumbnail at left, we've highlighted two good examples: At lower left, you can see a literal bright spot in the market where a cluster of green rectangles stands out, and at the upper right, the eye is drawn to a lone red rectangle against a relatively neutral background.

Once you've sighted an interesting feature, it's time to investigate. In the case of the lone red rectangle, shown enlarged at right, you might click to see what company it is (in this case Halliburton, an oil driller) and then jump to the news page for more information. On this day you would have learned that the company had just announced a layoff of 2,750 employees. That kind of company-specific news is often behind price movements that stand out from the background.

What about that bright spot? Shown enlarged at left, it represents a group of retailers, including Gap, Dayton Hudson and The Limited. On this day several stores had reported robust holiday sales, giving the entire sector a strong lift and explaining the bullish tone of the market as a whole.

Cut to the chase
For another perspective on the map, use the control panel to highlight the day's biggest gainers and losers. This view is especially good for picking out price changes in smaller companies. For instance, on this day one of the biggest movers on the map was Advanced Fiber Communications -- easy to miss next to relative giants like Bell South and GTE. When you see a stock making a dramatic move, zoom in to see the top gainers and losers within its sector or industry. Often you'll find other companies making similar moves.

A sense of proportion
Because the size of each company in the map corresponds to its market capitalization, the map lets you easily contrast the valuations of different companies. Those comparisons can be valuable: On December 29 the top story in the New York Times business section was that Charles Schwab had drawn even with Merrill Lynch in total market capitalization. That may have been news to readers of the Times -- but users of the map who had been following the investment banking industry (as seen here on the map) had seen it coming for a while.

Those are just a few of the ways that the map can help you read the market. If you have a favorite method of reading the map not mentioned here, please email us. We'll post a summary of the responses.