9 Minute Read

Consumer Confidence

March 31, 2015

By | 1 Comment

There are two consumer confidence reports released on a monthly basis. The first is the University of Michigan Consumer Sentiment Report that’s released around the middle of the month, and the second one is the Conference Board Consumer Confidence Report, which is released the last Tuesday of the month. Both reports track consumer confidence for the prior month. The CB report is a survey of 5,000 confidence report which asks consumers their opinion on business conditions which was unchanged at 26.7. The report also asks opinion on business conditions being bad which increased to 19.4%, an increase from the prior month of 16.7%. The last question in the survey is in regard to the employment market, which was mixed with 25.4% of respondents claiming a job is hard to get and 20.6% claiming jobs are plentiful. The actual index moved up to 101.3%.

In a box, the increase in consumer sentiment is a positive. However, when you look at the breakdown in the numbers, it leads to a very mixed response in sentiment. How does consumer sentiment relate to market action? The first graph represents how consumer confidence is always at a high prior to the market crashing and at a low after the market crashes. This is the typical response as consumers are always reactionary to prior conditions. Traders are always projecting future expectations. There is a slight correlation between consumer confidence and market reaction. The problem for consumers is that consumer confidence lags market response; so when the market starts going down, consumers are always late to sell and late to buy when the market bottoms out. As a trader, a high consumer confidence at the top of the market cycle is always a tell regarding future expectation as consumers are always late to adjust.

CS

es

At the bottom of the market in 2009 when consumers finally had enough of the losses which accounted for trillions of savings in retirement accounts, there were movements that were started regarding placing the blame on Wall Street for creating the crash. While this is somewhat true give the neo-liberal economic system the United States participated in for 25 years prior to the crash in 2008, the actual crashes are not some form of devious plan by Wall Street; they’re just trading price action and using market cycles and an understanding of the economic reporting system to allocate positions. They’re simply more aware of the economy, specifically the problems in the economic system and then getting in front of consumers in the sell cycle.

Consumers can do the same thing and profit in bear markets. The problem is they make their investment decisions on what they see in economy and not what they see in the price action which always moves slightly in front of the economic cycle.

Hopium is not a strategy or plan.

Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis.  This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise.  Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products.  By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials.  In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.

 

All investing and trading in the securities market involves a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax and accounting advisers, to determine whether such trading or investment is appropriate for that user.

One Reply to “Consumer Confidence”

  1. Coach D says:

    Awesome Post Matt

Comments are closed.

Chart Modal

Tackle Trading

Book a FREE Consultation

Sign up for a free consultation to build your Educational Plan.