Wednesday, September 30, 2009
New Notes Online
I have two more sets of online notes to complete the Bond Market information now being covered in class. These are listed near the Bond notes on the online syllabus. If you want to download these from this post, here are the links: The Yield Curve, Stock Market, and Interest Rates and The Money Market.
Wednesday, September 23, 2009
Fed Decision?
As expected, at 2:15 today the Federal Reserve made its decision not to raise rates (thank God!), and released its short statement summarizing its assessment of the economy now and in the future. Here is a copy of the actual Fed statement. And, as I indicated to you in class, the media provided an anal and microscopic evaluation of this statement compared to the previous one (click here).
How did the stock market react? Below is an image of the S&P 500 using 15-minute intervals (click to enlarge). Look this over, as a number of the key elements for reading market momentum show up. First, note when the announcement occurred at 2:15. The initial reaction was very positive (large up bar). But, that wasn't sustainable, as the RSI(9) showed an overbought reading (above 70). The next 15 minutes, we see a classic illustration of what happens when momentum diminishes -- a bar with a significant upper tail. This indicates that the bulls were able to push price fairly high, but the bears ultimately beat them back. For that bar, note the close (of the 15 minutes) was almost identical to the open. In the next bar, the open was above the prior bar's close, but things got bad for the bulls as the bears were clearly in control at this point. Take a look at the last bar of the trading day - a large range, the bears were clearly in control by then, and the close was almost at the low for that 15-minute period.
The day ended with an ugly price bar, but a glimmer of hope for tomorrow -- the RSI was giving an oversold reading (was below 30). If price should continue to fall, how low can we expect it to fall? Let me restate this: where is the next level of support? To find this, use the rule from class: look to the left. In other words, extend the time period of the chart. In the second graph (click to enlarge), I have extended to 5 days. From this, we are able to see the next level of support at around 1058.
Let's see what happens tomorrow.
How did the stock market react? Below is an image of the S&P 500 using 15-minute intervals (click to enlarge). Look this over, as a number of the key elements for reading market momentum show up. First, note when the announcement occurred at 2:15. The initial reaction was very positive (large up bar). But, that wasn't sustainable, as the RSI(9) showed an overbought reading (above 70). The next 15 minutes, we see a classic illustration of what happens when momentum diminishes -- a bar with a significant upper tail. This indicates that the bulls were able to push price fairly high, but the bears ultimately beat them back. For that bar, note the close (of the 15 minutes) was almost identical to the open. In the next bar, the open was above the prior bar's close, but things got bad for the bulls as the bears were clearly in control at this point. Take a look at the last bar of the trading day - a large range, the bears were clearly in control by then, and the close was almost at the low for that 15-minute period.
The day ended with an ugly price bar, but a glimmer of hope for tomorrow -- the RSI was giving an oversold reading (was below 30). If price should continue to fall, how low can we expect it to fall? Let me restate this: where is the next level of support? To find this, use the rule from class: look to the left. In other words, extend the time period of the chart. In the second graph (click to enlarge), I have extended to 5 days. From this, we are able to see the next level of support at around 1058.Let's see what happens tomorrow.
Tuesday, September 8, 2009
Welcome back!
Welcome to the Fall 2009 semester.
This blog will have postings throughout the semester -- my way of communicating important information to you when we are not meeting as a class. Check in on the days after class meets, especially on weekends. To make this worth your while, there will be two or three extra credit assignments posted on the Blog throughout the semester.
The past year was dominated by a severe financial crisis and a global recession. The recession was so severe (believed to be the worst since the Depression) that it took on a name: "The Great Recession." This semester, growth remains a major concern, as there is considerable debate about whether or not a national economic recovery has actually begun. Whether or not this is so (I believe we are in the earliest stages of a recovery), credit market weakness (ongoing credit problems and further after-effects of sub-prime mortgages) will also be important, as will the behavior of inflation (will it suddenly spark as some observers fear?). In its next move, the Fed will raise the fed funds rate, as it is currently at (or near) 0. The only question that remains is when such a rate hike will occur.
By semester's end, you will come to understand that all of the factors we will be discussing throughout the semester are interrelated. And, as the semester unfolds, we'll see what the collective actions of the world's central banks will be, and if their assessments of what they need to do prove to be correct.
For now, read all of Stikki Stock Charts for next Thursday and visit the web site: Stockcharts.com. On the online syllabus I have added introductory material that will assist you in using that web site (we will be referring to it all semester).
If you have any questions throughout the semester, don't hesitate to e-mail me (llardaro@uri.edu) and/or stop by my office, Chafee 804. DO NOT LEAVE PHONE MESSAGES!!
This blog will have postings throughout the semester -- my way of communicating important information to you when we are not meeting as a class. Check in on the days after class meets, especially on weekends. To make this worth your while, there will be two or three extra credit assignments posted on the Blog throughout the semester.
The past year was dominated by a severe financial crisis and a global recession. The recession was so severe (believed to be the worst since the Depression) that it took on a name: "The Great Recession." This semester, growth remains a major concern, as there is considerable debate about whether or not a national economic recovery has actually begun. Whether or not this is so (I believe we are in the earliest stages of a recovery), credit market weakness (ongoing credit problems and further after-effects of sub-prime mortgages) will also be important, as will the behavior of inflation (will it suddenly spark as some observers fear?). In its next move, the Fed will raise the fed funds rate, as it is currently at (or near) 0. The only question that remains is when such a rate hike will occur.
By semester's end, you will come to understand that all of the factors we will be discussing throughout the semester are interrelated. And, as the semester unfolds, we'll see what the collective actions of the world's central banks will be, and if their assessments of what they need to do prove to be correct.
For now, read all of Stikki Stock Charts for next Thursday and visit the web site: Stockcharts.com. On the online syllabus I have added introductory material that will assist you in using that web site (we will be referring to it all semester).
If you have any questions throughout the semester, don't hesitate to e-mail me (llardaro@uri.edu) and/or stop by my office, Chafee 804. DO NOT LEAVE PHONE MESSAGES!!
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