Sunday, January 25, 2009

Economic Indicators

1. Yield Curve

To draw the yield curve plot the 3 month treasury bill, 10 year bond and 30 year bond.
Normal yield is curve is upward slopping since the bond investors want higher yield for a 30 year duration instead of 3 month.

What is an inverted yield curve, it means 30 year rates fall below the 3 months rates it means that long term investors are indicating the economy is going to cool down in the future or a recssion is in the cards.

2. Average number of initial applications for unemployment insurance

The increase in this number indicates bad for the economy but decrease creates an upcoming bull market.

3. Michigan Consumer Sentiment Index

Shows how the consumer sentiment decrease would be bad for the market in general.

4. S&P 500 50 day moving average

This is a good indicator because it gives you all the above trends priced in if the S&P 500 goes below 50 dma a good place to get out of equities and start shorting stocks.

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