Seven Indicators That Move Markets: Forecasting Future Market Movements for Profitable Investments

by Kasriel, Paul; Schap, Keith

• ISBN13: 9780071370134
• ISBN10: 0071370137
• Edition: 1st
• Format: Hardcover
• Copyright: 2002-10-19
• Publisher: McGraw-Hill Education

Summary

How to understandshy;shy;and profit fromshy;shy;reliable and easy-to-use indicators that are often overlooked by the popular pressSeven Indicators That Move Marketsreveals easy-to-use indicators that have been shown to actually forecast where the financial markets are going next. These indicators, widely available in daily newspapers and on the Internet, provide continuously updated figures and data that describe what market users are thinking todayshy;shy;and where the markets could be headed tomorrow.This timely book shows savvy investors where and when to look for these market indicators, how to use them to structure investment strategies, and which asset allocations work best for specific market conditions. It contains hands-on techniques for: Filtering fact from rumor in the financial press Understanding relationships between indicators and investment choices Evaluating market data in relation to Fed policy

Author Biography

Paul Kasriel, director of economic research for The Northern Trust Company, is responsible for making the corporation's economic and interest-rate forecasts. Through his economic and financial commentaries, Kasriel has developed a loyal following in the financial community. He is often quoted in national publications including Barron's, BusinessWeek, Investor's Business Daily, and The New York Times, and he has appeared on CNN, CNBC, and PBS.

Keith Schap is a writer in the market and product development department of the Chicago Board of Trade. Previously a senior editor with Futures magazine, where he developed market outlooks for numerous markets, Schap has contributed over 300 articles to magazines and journals including Futures, Treasury and Risk Management, and Derivative Strategies.

Table of Contents

Preface	p. xi
Market Indicators for a New Investment Era	p. 1
Who	p. 2
The Legendary Perfect Trade	p. 3
Patience, Persistence, and Probability	p. 4
Concrete, Public, and Forward-Looking	p. 5
A Market Can't Think, or Maybe It Can	p. 9
A Glimpse at the Structure of This Book	p. 10
A Suggestion about How to Use This Book	p. 11
The Role of the Fed	p. 13
The Fed's Balancing Act	p. 14
Where the Government-Sponsored Enterprises Fit In	p. 15
How the Fed Works	p. 18
The Fed Is Irrelevant? Guess Again	p. 20
Two Basic Ideas	p. 22
Transfer Credit and Created Credit	p. 23
Fed Funds Spreads Can Shed Light on Future Fed Actions	p. 29
Defining Fed Funds Futures	p. 30
Deriving the Market Consensus	p. 31
Tracking a Shifting Consensus	p. 34
Shifting from a Stable Outlook to Expectations of Tightening	p. 36
Tracking a Growing Consensus	p. 38
Finding the Probability of a Fed Policy Shift	p. 40
A Valuable Tool	p. 41
Yield-Curve Shape Changes Foretell Economic Developments	p. 43
Flatter-Steeper	p. 45
Yield Curves As Indicators	p. 45
Accounting for Yield-Curve Shape	p. 47
Complicating Our Understanding of Yield-Curve Shape	p. 49
Supply-Demand Pressure Counts, Too	p. 51
Don't Forget This Is the Information Age	p. 53
Credit Supply-Credit Demand	p. 54
The Problem with the Treasury Yield Curve As Benchmark	p. 57
TEDs, TAGs, and the Credit Story	p. 59
Pricing Credit in the Bond Market	p. 60
The Plot Thickens	p. 61
The Original TED Spread	p. 65
The Market Took a Longer Look at the TED	p. 69
Term TEDs Reflect Market Concerns	p. 70
TAG Spreads Tell the Same Story As Term TEDs	p. 73
Calculating the TAG Spread	p. 74
Relating TAGs and TEDs	p. 75
Volatility--An Indicator of Market Potential	p. 79
Looking Back and Looking Forward	p. 81
Scaling Volatility Information to Your Investment Horizon	p. 86
A More Advanced Idea	p. 87
A Note on the Psychology of Volatility	p. 90
Volatility Can Help with Timing	p. 92
Why Heating Oil Is Relevant	p. 93
Developing a Sense of How Far Down Down Might Be	p. 99
Tying Stock Prices to Oil Prices	p. 100
What the Markets Suggest	p. 102
A Word of Caution	p. 103
Futures Price Relationships Enrich the Story	p. 105
The Basis	p. 106
The Force of Arbitrage	p. 107
Commodity Spreads	p. 109
A Sense of History	p. 112
The Energy Markets Signal Similar Storage Messages	p. 114
Gauging the Profitability of Refining	p. 118
The Time to Act	p. 120
Commodity Prices--The Next Link in the Chain	p. 123
The Trouble with Commodity Indexes	p. 123
Supply Shocks Can Blur Signals	p. 124
A Demand-Driven Index Seems a Better Forecaster	p. 126
Copper: Everyman's Economist	p. 128
A Look at the Futures Price Spreads	p. 130
The LME Markets Reinforce the Copper Story	p. 138
Oil Matters in Evaluating the Potential for Inflation	p. 138
The Trouble with Gold	p. 142
Changing Rules and Noisy Markets	p. 145
Deregulating a Good Indicator	p. 146
The Effect of Deposit-Rate Deregulation on the Relationship between the Yield Curve and Economic Growth	p. 147
The Treasury Buyback Distorts a Useful Indicator	p. 148
The Traditional TED Was Not "Too Big to Fail"	p. 149
Markets Can Get Noisy	p. 151
Putting the Market Indicators to Work	p. 161
A Framework for Predicting and Interpreting Economic Events	p. 161
Investing a Step at a Time	p. 164
The Yield Spread Provides Early Warning	p. 164
Reading the Exhibits	p. 168
Motivating the Use of Aaa Corporate Yields	p. 168
Industrial Commodity Prices Should Follow the Yield Curve	p. 170
Credit Spreads Provide Further Evidence	p. 170
Assumptions about Investing	p. 174
Market Indicators Prompt Asset Allocation Shifts	p. 175
The Conflict between Good Policy and Human Nature	p. 176
Indications of When to Shift Assets	p. 178
Volatility Can Help You Think about Turning Points	p. 179
Typical Consumer Behavior Argues for Strategic Discretion	p. 181
Housing Starts Tell a Similar Story	p. 181
A Framework, Not a Final Answer	p. 184
Glossary	p. 187
Index	p. 193
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