Stock market is overbought

Written by Al Amzin


Continued from page 1

As mentioned above, CAPM estimatesrepparttar point when stock market becomes unstable.

It becomes obvious if you take a look onrepparttar 112578 rate of change. When rates of change are more then 1, stock market is considered risky. The morerepparttar 112579 rates of changerepparttar 112580 more it’s risky. When slope is less then 1, we can say that stock market is underestimated and duringrepparttar 112581 some period it will aspire to 1.

Variables that we place on different axes can be negative. For instance, to calculate rate of growth for GDP 1980 we have to deduct GDP 1995 from GDP 1980 and this negative deduction compare withrepparttar 112582 1995 date.

Let’s compare 3 main American indices to find common features. The first one Dow Jones Industrial Average represents blue chip companies, second Nasdaq Composite Index - technology companies, andrepparttar 112583 third one S&P 500, consists of both blue chips and technology companies.

[illustrations]

It’s obvious, that these three main indices have common behavior in these three patterns. Stock market growth rate outstrips economy growth. Stock market is overestimated. This situation is lasting for a long time, and now it’s getting even worse.

It’s clear that stock market indices have dependence. As a result of it let’s reviewrepparttar 112584 dynamic of main American index Dow Jones.

Linear part locates between 1980 and 1990. It can be revealed by line with an angle 1.14. In this period stock market rate of growth a little bit bigger then economy rate of growth. Beginning withrepparttar 112585 1994 Dow Jones Industrial Average grows very fast comparing to real economy growth. You can see it onrepparttar 112586 graph. The angle has increased more then 3 times. This means that stock market growth exceeds real economy growth more then 3 times. Such rise lasted tillrepparttar 112587 2000. In 2000 raise changed into fall (angle equals 5.96). Duringrepparttar 112588 fall stock market rate of growth didn’t reach economy rate of growth. This means that stock market is still overbought. Situation is getting even worse every day. DJIA is growing and getting overheated even more. This situation may cause a stock market collapse. It doesn’t mean that stock market falls today or tomorrow. But it will happen in any case in a future.

Ifrepparttar 112589 S&P 500 Index looks like DJIA,repparttar 112590 situation withrepparttar 112591 Nasdaq composite seems even worse. Since 1994repparttar 112592 Nasdaq Composite rate of growth grows up more then 12 times. Starting from 2000repparttar 112593 Nasdaq fall was much horrible then Dow. Technology index didn’t reach its fair pricerepparttar 112594 same as Dow Jones. Beta coefficient equals 5.19 right now. According to these calculations we can say thatrepparttar 112595 Nasdaq composite is overestimated at present. It can cause even greater collapse.

So, ifrepparttar 112596 index value didn’t reachrepparttar 112597 balanced price, stock market fall possibility will always exist. We’ve got such situation right now. Stock market is overheated already and getting even more overheated. It’s time for traders to think if this a good time for investing or not and what kind of trading strategy to follow.

We are not advising you not to invest in stock market, we just warning you that it’s very risky right now. Stock market collapse is not far off. Traders, be careful!

None


Shopping For A Car? Don’t Get Taken For A Ride!

Written by James H. Dimmitt


Continued from page 1

Here's what can happen behindrepparttar scenes: a bank approves an interest rate,repparttar 112577 dealer tacks on additional percentage points as a kind of service fee and thenrepparttar 112578 dealer and lender splitrepparttar 112579 difference.

To be fair, not every dealer is guilty of this markup. However, enough are involved that many states are now considering new "truth in advertising" lending laws. New laws would require auto dealers to inform customers ofrepparttar 112580 original rate offered byrepparttar 112581 bank and whatrepparttar 112582 dealer is offering torepparttar 112583 customer, after tacking on their additional finance fee.

Shopping around with your bank, credit union orrepparttar 112584 internet can help you to findrepparttar 112585 interest rate that you qualify for in a loan. Remember,repparttar 112586 auto dealer is in business to sell cars, not to offer loans.

The next time you're inrepparttar 112587 market for a car, don't just researchrepparttar 112588 model, make, and add-ons. Research fair interest rates as well so that you'll know if you're gettingrepparttar 112589 best rate possible fromrepparttar 112590 auto dealer or if you're being "taken for a ride."

Author: James H. Dimmitt James is editor of "TO YOUR CREDIT", a weekly free newsletter. Subscribe to the newsletter by visiting http://www.yourfreecreditreportnow.com. He is also author of “Identity Theft - How to Avoid Becoming the Next Victim!” available at http://tinyurl.com/bc45


    <Back to Page 1
 
ImproveHomeLife.com © 2005
Terms of Use