Online Stock Trading | When will we know if Sub-Prime has hurt the consumer?

When will we know if Sub-Prime has hurt the consumer?


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How will we know if the consumer will be affected by the sub-prime meltdown?  If people truly are walking away from their homes, will it hurt their spending habits?  Bears on Wall Street have no doubts in their minds that the US consumer will more than likely pack it in and will not keep up spending.  Bulls on the other hand are just scared at the moment and will not offer up a “rosey” outlook.  The real question is, how will we know if the consumer is actually negatively impacted by the Sub-Prime crisis?

There are two things I will be looking for to confirm whether or not the US consumer is adversely affected by the Sub-prime meltdown.  One way we’ll know is the price and volume action of the markets.  It is widely accepted that the US Consumer makes up roughtly 70-75% of consumption in the US.  If they were to slow down the pace of consumption the market would see the signs and begin to sell off on volume.  At the moment, we’ve seen this rally move higher on lower trade.  Not a great sign of strength.  But, it is far to early to tell if the consumer is faltering.  But, there is a specific date I believe that will reveal how the US Consumer is doing.

All the retail analysts in the world will not be able to precisely pinpoint how the US consumer will fare in the next coming months.  One of the biggest shopping days of the year, Black Friday will foreshadow the behavior of the US consumer for the big Christmas shopping season.  The official kick off for the Christmas shopping season is met with great deals and quite the fan fare.  I believe this day will tell the tale of the Christmas shopping season.  If it is a blow out and sales skyrocket then we can determine that the US consumer does not have a real issue with Sub-prime for the near future.  On the other hand, if we see flat to dismal sales numbers I believe the bears take a chunk out of Wall Street.

The market action leading up prior to Black Friday will be a foreshadowing event.  Pay close attention to action preceeding the holiday week.  I think it will be important how I would position myself heading into Thanksgiving.  It is completely silly to start entering into positions here as we have no idea what the market has instore for us.  NONE WHATSOEVER.  However, we can get ourselves into the mindset early and make sure we have a laser focus on price and volume action. 

Make sure you have November 23, 2007 marked down as Black Friday and have an ear to price and volume leading up to that week.

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