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Chart of the Week: U Michigan Sentiment Index Gives Market Warning

Posted By Barry Ritholtz On September 19, 2005 @ 1:14 pm In Markets,Psychology,Retail | Comments Disabled

"Such steep and widespread declines in confidence have
typically triggered recessions," though a recession is not
"pre-ordained,"
said Richard Curtin, the director of U Mich consumer
surveys. The drop paralleled the decline following Iraq’s invasion of Kuwait in
1990.

U Michigan Sentiment Index Gives Market Warning
click for larger chart
Sentiment_crash [1]
Source: Robert McHugh [2]

Some Traders find a correlation between consumer sentiment
and Dow Industrials’ price movements. Robert McHugh [2] states that “often, the sentiment index and equity prices move
contemporaneously, so we do not benefit from foresight. On occasion, we do get
an early warning as the sentiment index leads prices.” We will see if this
recent drop presages another.


Random Items:

It’s Fourth and Long for Stocks [3] [4]

[4]

Gross: Short-term rates near peak [4]

Pump panic, gold glee [5]

Overcoming Market Panic (Brett Steenbarger) [6]

Silicon Valley Apple Roundtable: The Next Generation [7]

Katrina Burst More Than New Orleans’s Old Levees [8]

The Flying Mobulas of the Sea of Cortez [9]



Quote of the Day:

"Any activity becomes creative when
the doer cares about doing it right, or better."    
~John Updike [10]


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2005/09/chart-of-the-week-u-michigan-sentiment-index-gives-market-warning/

URLs in this post:

[1] Image: http://bigpicture.typepad.com/.shared/image.html?/photos/uncategorized/sentiment_crash.jpg

[2] Robert McHugh: http://www.safehaven.com/article-3799.htm

[3] It’s Fourth and Long for Stocks: http://online.wsj.com/article/0,,SB112699914933644145,00.html?mod=home_we_banner_right

[4] : http://www.marketwatch.com/news/story.asp?dist=&param=archive&siteid=mktw&guid=%7B54C2F78C%2D8DC5%2D4FA5%2DAFD8%2D8A0099C91984%7D&garden=&minisite=

[5] Pump panic, gold glee: http://www.economist.com/agenda/displayStory.cfm?story_id=4398821

[6] Overcoming Market Panic (Brett Steenbarger): http://www.turtletrader.com/Overcoming-Market-Panic.pdf

[7] Silicon Valley Apple Roundtable: The Next Generation: http://forums.siliconvalley.com/n/mb/message.asp?webtag=kr-svapple05

[8] Katrina Burst More Than New Orleans’s Old Levees: http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_baum&sid=aFf26Syq3aGk

[9] The Flying Mobulas of the Sea of Cortez: http://www.malbertphoto.com/mobulas1.html

[10] John Updike: http://en.wikiquote.org/wiki/John_Updike

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