By: Peter Reznicek Chief Equity Strategist ShadowTrader http://www.ShadowTrader.net Link to first graph in article: http://assets.shadowtrader.net/charts/090701cc.gif Link to second graph in article: http://assets.shadowtrader.net/charts/090701spx.gif
Stock market action on June 30, 2009 was a direct result of economic news which included the Consumer Confidence reading for June, 2009. The release of this data and subsequent selloff in the markets offered a rare opportunity where fundamental and technical analysis intersected to possibly magnify insight into where prices were headed in the near future.(The link to first chart in author information area below.)Above is a monthly chart of retail sales (gray bars) and consumer confidence (blue line) from January, 2006 thru June, 2009. The chart gives an excellent visual of just how tough things became for the U.S. economy beginning in the summer of 2007. The green circle highlights the sudden downturn which was reported on the morning of June 30, 2009. This was the first dip since the bear market rally began in early March, 2009. While all of this is very interesting, it's not enough data to be useful as an indicator of future market direction. For that we need a look back over multiple months of consumer confidence data to see if there is indeed correlation. To that end, we have lifted the blue line off the chart above and placed it upon the monthly chart of the S&P 500 Index below.(The link to second chart in author information area below)Since the beginning of the bear market that began in the fall of 2007, there have been distinct points when consumer confidence (blue line) provided a "heads up" to forthcoming stock market price action. The first (orange oval) was a warning that began three months prior to the beginning of the market down turn as a divergence between the S&P (still going up) and Consumer Confidence (starting to wane) began. The next (red circles) gave about one month lead time to the second leg of the major decline. And the third (green circle) came approximately one month prior to the market's rally off the March, 2009 lows. This look back does give credence to the performance of consumer confidence as a leading indicator.One could reason that the shorter lead time of the last two consumer confidence reversal events (red and green circles) may simply be from the fact that traders sat up and took notice after the first leg of the stock market rout that began in the fall of 2007. This prompts further investigation of a correlation between volatility and the length of time it takes for the market to react to a reversal of consumer confidence, but this is a topic for another article though.The magenta oval highlights the confluence of the consumer confidence decline after a very steep increase over the previous three months and the monthly doji pattern on the chart which is generally accepted as a pattern indicating pause in price action and possible reversal. If the period of history that we have examined here holds true and the Consumer Confidence Index follows through to the downside, the market could very well have a retest of the early March 2009 lows.
- Related Videos
- Related Articles
- Ask / Related Q&A
Relocating Your Office With Minimum Fuss
By: Gen Wright | 08/11/2009Shifting locations can be one of the most daunting tasks a business owner has to perform. Whether it is a short move to a new outlet somewhere in the city or an inter-continental move, it involves shifting machinery, equipment and furniture that has been accumulated painstakingly over months and years.
Waste Management While Relocating Your Office
By: Gen Wright | 08/11/2009Waste management can become a compelling issue in any move. In office removals, this is even more pertinent as more and more companies opt for downsizing their office spaces.
The Power of Seller Finance to sell your business
By: Andrew Rogerson | 08/11/2009Selling a business comes with many challenges. The number one reason most transactions don’t close after a buyer and seller have “negotiated” a deal is that the landlord cannot come to terms with the seller and/or buyer. The number two reason is that finance is not available.
Industries That Need Antibacterial Hand Sanitizers
By: Gen Wright | 08/11/2009People nowadays are concerned about illnesses that they can catch and scared by the news reports on the television. It seems that each day a new virus comes out which can kill you.
Should You Attend A Business Networking Event?
By: Gen Wright | 07/11/2009Are you a new or existing business owner? Are you not getting the necessary clients you want or need? Then you need to consider attending a business networking event.
Install Your Businesses With Fire Preventive Equipments
By: Bennett Glover | 06/11/2009A lot of properties are instantly lost when a business establishment experiences fire in its premise. Not only do properties go to ashes, but also the lives of the building’s occupants. For concerned business establishments, their premises are automatically subject to maintain the building regulations. Such building regulations tell you how to strategically design your building to make it a much safer place for work.
Why Is Fire Risk Assessment Important For Business Owners
By: Bennett Glover | 06/11/2009A fire risk assessment is a very important part in making as well as maintaining your work place a safe environment for your employees. Not only will it determine the fire hazards within your establishments, but it will also determine the right actions needed to be undertaken to prevent such untoward incidents as having fire in your business location.
Boutique Hotels - The Perfect Place For A Fun And Relaxed Vacation
By: Gen Wright | 08/11/2009 | Travel TipsBoutique hotels are typically small, period-style, quirky hotels with an intimate ambience, perfect for some downtime on a family vacation.
Relocating Your Office With Minimum Fuss
By: Gen Wright | 08/11/2009 | Ask an ExpertShifting locations can be one of the most daunting tasks a business owner has to perform. Whether it is a short move to a new outlet somewhere in the city or an inter-continental move, it involves shifting machinery, equipment and furniture that has been accumulated painstakingly over months and years.
Waste Management While Relocating Your Office
By: Gen Wright | 08/11/2009 | Ask an ExpertWaste management can become a compelling issue in any move. In office removals, this is even more pertinent as more and more companies opt for downsizing their office spaces.
With Or Without Google Sitemap For Your Blog?
By: Gen Wright | 08/11/2009 | Affiliate ProgramsA site map is a web page that contains all the links to your website. The question is, do you really need a site map for your site?
Industries That Need Antibacterial Hand Sanitizers
By: Gen Wright | 08/11/2009 | Ask an ExpertPeople nowadays are concerned about illnesses that they can catch and scared by the news reports on the television. It seems that each day a new virus comes out which can kill you.
The History Of Aintree Racecourse
By: Gen Wright | 08/11/2009 | AerobicsAintree Racecourse, Liverpool, is one of the most famous racecourses in the world and it's 180 year history is as rich and interesting as one could imagine.
Domain Name - How to Buy and Sell
By: Gen Wright | 08/11/2009 | Affiliate ProgramsA domain name can be a very valuable asset for your online business. When promoted regularly, it can become a powerful brand that helps to boost sales. Visitors learn to trust a domain name given enough time.
What Makes Wicker Furniture Different from the Norm?
By: Gen Wright | 08/11/2009 | DIYYou've been in a furniture store before. If you're like some, you may even look forward to it. Maybe you are fixing up a special room - your room.