Case Problem 9.2

Deb Takes Measure of the Market

LG5

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. The textbook for the course was, in fact, this one, and the class just completed this chapter. 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 of the following measures to help her determine if now is, indeed, a good time to start putting money into the stock market:

Advance-decline line

New highs-new lows indicator (Assume the current 10-day moving average is 0 and the last 10 periods were each 0.)

Arms index

Mutual fund cash ratio

Deb goes to the Internet and, after considerable effort, is able to put together the accompanying table of data.

Questions

Based on the data presented in the table, calculate a value (where appropriate) for periods 1 through 5, for each of the 4 measures listed above. Chart your results, where applicable.

Discuss each measure individually and note what it indicates for the market, as it now stands. Taken collectively, what do these 4 measures indicate about the current state of the market? According to these measures, is this a good time for Deb to consider getting into the market, or should she wait a while? Explain.

Comment on the time periods used in the table, which are not defined here. What if they were relatively long intervals of time? What if they were relatively short? Explain how the length of the time periods can affect the measures.

Dow Jones Industrial Average	8,300	7,250	8,000	9,000	9,400
Dow Transportation Average	2,375	2,000	2,000	2,850	3,250
New highs	68	85	85	120	200
New lows	75	60	80	75	20
Volume up	600,000,000	836,254,123	275,637,497	875,365,980	1,159,534,297
Volume down	600,000,000	263,745,877	824,362,503	424,634,020	313,365,599
Mutual fund cash (trillions of dollars)	$0.31	$0.32	$0.47	$0.61	$0.74
Total assets managed (trillions of dollars)	$6.94	$6.40	$6.78	$6.73	$7.42
Advancing issues (NYSE)	1,120	1,278	1,270	1,916	1,929
Declining issues (NYSE)	2,130	1,972	1,980	1,334	1,321

 

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Black Diamond Inc. (NMS: BDE)
Exchange rate used is that of the Year End reported date
As Reported Annual Balance Sheet
Report Date	12/31/2015
Currency	USD
Audit Status	Not Qualified
Consolidated	Yes
Scale	Thousands
Cash	88401.00
Marketable securities	9824.00
Accounts receivable, gross	26958.00
Less: allowance for doubtful accounts	184.00
Accounts receivable, net	26774.00
Finished goods	43117.00
Work-in-process	1730.00
Raw materials & supplies	6649.00
Inventories	51496.00
Prepaid & other current assets	3337.00
Income tax receivable	2550.00
Deferred income taxes	–
Total current assets	182382.00
Land	2850.00
Buildings & improvements	4093.00
Furniture & fixtures	3320.00
Computer hardware & software	4729.00
Machinery & equipment	9790.00
Construction in progress	477.00
Property & equipment, gross	25259.00
Less: accumulated depreciation	14469.00
Property & equipment, net	10790.00
Other intangible assets, net	10934.00
Indefinite lived intangible assets	22644.00
Definite lived intangible assets, net	–
Goodwill	–
Deferred income taxes	–
Other long-term assets	1843.00
Total assets	228593.00
Accounts payable & accrued liabilities	21446.00
Deferred income taxes	–
Current portion of long-term debt	–
Total current liabilities	21446.00
Revolving credit facilities	–
Foreign credit facilities	–
Senior subordinated note	20028.00
Capital leases	–
Term notes	105.00
Total long-term debt, including current portion	20133.00
Less: current portion	–
Long-term debt	20133.00
Deferred income taxes	8969.00
Other long-term liabilities	2042.00
Total liabilities	52590.00
Common stock	3.00
Additional paid-in capital	483698.00
Retained earnings (accumulated deficit)	-299168.00
Less treasury stock, at cost	7320.00
Unrealized gains (losses) on marketable securities	-107.00
Foreign currency translation adjustments	-1035.00
Unrealized gains (losses) on cash flow hedges	-68.00
Accumulated other comprehensive income (loss)	-1210.00
Total stockholder’s equity (deficit)	176003.00
Current Ratio	8.50
Debt/Equity Ratio	0.12
Free Cash Flow
Earnings per Share	-2.43
Price/Earnings Ratio
Return on Equity
Net Profit Margin

 

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