Case Problem 9.2: Deb Takes Measure of the Market
August 29, 2012
Assignment case problem 9.2 of Gitman/Joehnk (2010), 11th editions: Deb Takes Measure of the Market
Several months ago, Deb Forrester received a substantial sum of money from the estate of her late aunt. Deb initially placed the money in a savings account because she was not sure what to do with it. Since then, however, she has taken a course in investments at the local university. Excited about what she has learned in class, Deb has decided that she definitely wants to invest in stocks. But before she does, she wants to use her newfound knowledge in technical analysis to determine whether now would be a good time to enter the market.
Deb has decided to use all 5 of the following measures to help her determine if now is a good time to start putting money into the stock market:
• Dow Theory
• Advance-decline line
• New highs-new lows (NH-NL) indicator (Assume the current 10-day moving average is zero and the last 10 periods were each zero.)
• Arms index
• Mutual fund cash ratio