honeycfa

An indicator calculated as the ratio of the average yield of 10 top-grade corporate bonds to the average yield on Dow Jones 40 bond is known as:

A) relative strength index.

B) confidence index.

C) breadth index.

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This is the definition of the confidence index. In periods of confidence, investors sell quality bonds and buy lower quality bonds looking for yield.  Quality bond prices will fall and their yields rise.  Lower grade bond prices will rise and their yields fall.  Thus, the CI ratio will increase during periods of confidence (e.g., from 0.07/0.10 = 0.7 to 0.08/0.09 = 0.89).  Note that the CI moves in the opposite direction of yield spreads.  In periods of confidence, yield spreads narrow and the CI gets bigger.  In periods of pessimism, spreads widen and the CI falls.

honeycfa

An indicator calculated as the ratio of the average yield of 10 top-grade corporate bonds to the average yield on Dow Jones 40 bond is known as:

A) relative strength index.

B) confidence index.

C) breadth index.

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This is the definition of the confidence index. In periods of confidence, investors sell quality bonds and buy lower quality bonds looking for yield.  Quality bond prices will fall and their yields rise.  Lower grade bond prices will rise and their yields fall.  Thus, the CI ratio will increase during periods of confidence (e.g., from 0.07/0.10 = 0.7 to 0.08/0.09 = 0.89).  Note that the CI moves in the opposite direction of yield spreads.  In periods of confidence, yield spreads narrow and the CI gets bigger.  In periods of pessimism, spreads widen and the CI falls.

honeycfa

When technical analysts say a stock has good "relative strength," they mean the:

A) ratio of the price of the stock to a market index has trended upward.

B) recent trading volume in the stock has exceeded the normal trading volume.

C) stock has performed well compared to other stocks in the same risk category as measured by beta.

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This is the definition of relative strength. When the ratio of the stock price to the market price increases over time, the stock is out-performing the market.