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Börsipäev 29. september

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  • Rev Shark:

    When the Consumer Frets, Take Heed
    9/29/2005 8:56 AM EDT

    "It is a good thing to learn caution from the misfortunes of others."

    -- Publilius Syrus

    While gulping down a cup of coffee this morning I glanced at the local papers and noticed a front page story discussing growing concerns about a recession. The article cites high energy costs, eroding consumer confidence, rising interest rates and slowing home sales as reasons.

    No matter the state of the market there are always some very astute folks making very compelling bearish arguments. If you want to find things to worry about there is never of a shortage. What we have to watch for is not the academic and theoretical arguments from pundits sitting around in their mahogany paneled offices but the attitude of the average consumer.

    The average consumer is generally a pretty optimistic fellow. He doesn't pay much attention to talk about bubbles and deficits and economic statistics but when he has to open his wallet and pays twice as much to fill his tank and heat his home and he sees more and more "For Sale" signs in his neighborhood, then he begins to worry.

    When Joe "Six Pack" starts to suffer some misfortune and becomes less optimistic about the future then we better seriously think about becoming more cautious in the market. The average consumer doesn't get much respect on Wall Street but ultimately he is the guy who is going to drive this market.

    In trading, Joe "Double Espresso" likes to think that all of his superior insight and understanding about complex economics is going to help him time the market. Sometimes it does, but sometimes all we have to do is consider what the average guy is thinking and feeling if we want to understand where this market is heading.

    If the technical condition of the market were better we might not have to worry about the erosion of consumer confidence, but that is not the case. The indices are in precarious condition and all it will take is one weak day to crack significant support.

    When consumers are not their usual optimistic selves its time to be cautious. Keep in mind that we have quarter-end window-dressing upon us and that may help hold this market up through the end of the week. The nice thing about that is that it will give you an opportunity to raise some cash. If you haven't already done so give it some careful consideration.

    We have a flat start to the day. Asian markets were up big, but oil and gold are up again and European markets are negative. The news flow is slow and market participants are looking for some sort of catalysts to drive their plans.

    Gary B. Smith:

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