Archive for the ‘School’ Category

Support and Resistance – What is really happening?

Thursday, April 30th, 2009

Support and resistance in technical analysis typically refers to a price of stock, commodity, and similar investment tools that becomes a stopping point. The support is the low point of the trading range and the resistance is the top.

What causes a stock or other investment tool to find a support and resistance? Support is the point where buyers exceed sellers. Resistance is the point where sellers exceed buyers. Basically support and resistance is the tug a war between the bulls and bears. Some say that the winner is typically the one who convinces the long term investors to follow them.


Currently the bulls have made a stand at 6500 on the Dow Industrial and the bears have made theirs at about 8000. Over the past two months there have been several reports citing the lack of the individual investor participation. Consumer confidence released Tuesday April 28th, 2009 has shown that Main Street is starting to feel more confident about the future, but their current situation is rather unchanged.

So it would appear we are at a tipping point. I would assume if Main Street starts to see a more measurable improvement in their current financial situation the bulls could win the war. If Main Street current financial situation either stagnates or gets worse than the bears would probably win. So what if the bulls or the bears win this one, who will win the next one?

Support and resistance is all about expectations. If you are a bull and expectation are exceeded, then the market will move your way. If you are a Bear and expectation are missed, then the market will probably move in your direction. High expectations are negative for bulls, since they are harder to exceed. Low expectations are negative for Bears, since they are harder to miss. What are you expectations?

Tags: , , , , ,
Posted in School, Stock Market Actions | No Comments »

Consumer Confidence – Propaganda or Main Street Gauge?

Wednesday, April 29th, 2009

Every month the Conference Board releases the results of a poll conducted by TNS of 5000 US Households. This poll is meant to capture the mood of the average US household during the month in question and apply a number to it. If the mood of US households is improving then supposedly this is a sign of improved consumer spending and better conditions on Main Street.

The questions asked during this poll focus on both present conditions and future outlook. This sampling of US households is asked to give their current individual condition and forecast the US economy as it relates to them.


The most recent poll released on April 28, 2009 showed an increase in US Consumer Confidence from 26.0 to 39.2. In this most recent poll the Present Situation Index increased slightly from 21.9 to 23.7. The Expectations Index rose dramatically from 30.2 to 49.5. From this poll it clearly shows currently that expectations outweigh existing conditions. This sampling of US Households has increased its optimism for the future.

Over the past two months Washington and Wall Street have increased their confidence dramatically as well. Washington has made comments hinting that we have possibly seen the worst and Wall Street has rallied to lofty levels in record time.

Both Washington and Wall Street have made extra efforts to remain optimistic. Washington now takes great care in releasing information in not to disrupt the Markets too much. Wall Street seems to have teamed up to shift their majority view from bearish to bullish. In my opinion it also appears that the financial press seems to praise the bulls and shun the bears.

Propaganda is the dissemination of information that is meant to influence the opinions or behaviors of people. Wall Street and Washing are focusing on the glimmers of light at the end of the tunnel. The light could be real or it could be a train coming, but we are still for the most part in the dark.

Wall Street and Washington have something to gain by keeping the US household positive. Wall Street wants US Households to invest their hard earned money into the market so they can make money. Washington wants US households to feel they are succeeding in solving to problems so they can keep “political will” on their side and succeed in their political agenda.

Is Consumer Confidence a gauge of Main Street finances or a measure of success in political and corporate propaganda?

Tags: , , , ,
Posted in Economics, School, Side Notes | No Comments »

What is Deflation?

Tuesday, March 24th, 2009

The simple answer is, prices coming down on goods and services. There are two types of deflation, good and bad.

Good Deflation:

Prices of goods and services are improved due to innovation either in manufacturing or in product delivery (i.e. inventory management).


Bad Deflation:

Prices of products and services are pressured by a lack of demand at current price level and demand can only be spurred by a price reduction. Some people actually feel as though bad deflation is a way of deflating an over inflated economy. When prices are forcefully reduced due to economic pressures, this causes increased unemployment, which perpetuates the situation. Companies must let people go to be able sell their products cheaper. This in return pressures the remaining workforce to pick up the slack without increased wages.

Many people may say that my definition of deflation is not descriptive enough to all the moving pieces (i.e. monetary value), but to me it is a simple way to identify and understand this potently destructive force.

Tags: , ,
Posted in Economics, School | 2 Comments »