Today’s economics are not for the timid. Above and beyond knowing the basics of how money works, there is another layer which needs to be fathomed. That layer is called by many shadow banking.

In the case of knowing about the world of shadow banking, sadly, ignorance is not bliss

The warning signs were clear that nothing good would come from the development of Collateralized Debt Obligations, CDOs. I was fortunate to have been in banking and in a group which voiced serious concerns over the development of crazier and crazier esoteric instruments. They were to be peddled as “same as cash” but were in fact far from that. By July 07 the auctions for these began to fail as financial institutions backed away.

The bankers started pushing the CDOs out the door. They managed to get them off their books and into the hands of others, most of whom were sold these as “same as cash” which of course they were not.

Who created these? Companies like Blackrock and Nuveen. The market for these froze by mid-Feb 2008. 300 billion dollars of “same as cash” assets were so much dead meat.

Those who had trusted that these instruments were really the same as cash found their economic lives grinding to a halt. The regulators of course were flooded by complaints.

Of course, no on e in the industry had really done anything wrong. The result was that at least a number of small investors got back their principal.

The press ignored the story. It must be a coincidence that the wrong-doers were also major sponsors.

Finally, when Bernanke and Paulson held the country ransom for 700 billion dollars the story got media attention.

It is not my ideal of accountability to have the taxpayer pay for the financial excesses of the financial institutions.

The rough condition of the stock market just after the last election was rumored to in part have been due to the rumor that “full bonuses” may not be forthcoming to the architects of the meltdown.

So what kind of bonuses are we talking. Dick Fuld, had in 07 cleared 34 million.

Clearly Rand’s notion of enlightened self-interest did not trump raw greed for the banking industry. For more on Rand, see Objectivism and the 1957 novel “Atlas Shrugged”.This all plays nicely into the capital C Conspiracy Theorists who are ready to gloat over the “I told ya so’s”.

Bailing out the international “Too big to fail” shows that the notion of national sovereignty is a thing of the past. The public has been asleep as the barbarian bankers not only got past the gates but quietly took over.

Is this to be the new world? Wait and see.

James Horne has been a financial analyst for over 10 years. He is CEO of Pure Reason LLC, the home of Shadowtraders. His voice has been heard by hundreds of students learning to trade Futures with Shadowtraders online day trading strategies. Before you buy any trading software, make sure you attend Shadowtraders Monday Night Webinar, and hosted by Barbara Cohen

As far as learning technical analysis goes, many investors will make short-term trades based on longer-term, “solid” patterns such as the head and shoulders top covered previously in this series. The problem with relying on solid patterns is that they are generally longer-term in nature and may not produce the short-term returns one hopes for.

The inside bar pattern is one such pattern from which investors can take short-term cues. This pattern indicates a possible change in investor sentiment in the short-term. In other words, if the overall trend has been heading down, the inside bar often indicates a reversal in that trend.

Spotting an Inside Bar

Investors who are just learning technical analysis might have a tough time identifying the inside bar. Explained (our website has a diagram), the inside bar pattern consists of a taller bar (wide trading range) followed by a shorter bar (tighter trading range). The shorter bar will fall within the same range as the preceding bar.

Supporting Criteria

When it comes to using the inside bar to commit to a trade, investors should seek additional confirmation through additional analysis. This step is often overlooked when investors start learning technical analysis. Other analysis includes fundamental data for the security, sector and market, as well as technical data such as support and resistance levels and momentum.

As far as the reliability of the inside bar pattern, investors will find greater success when the bar takes shape following a steeper inbound trend. In terms of the bars themselves, investors will want to see a longer first bar (which suggests that stronger momentum has dissipated and reversal is imminent) and a shorter second bar, which suggests a more dramatic reversal to come.

And lastly, the volume level should be lower for the second bar than for the first, as this hints at a better balance.

When it comes to learning technical analysis, investors should remember that there are many other indicators that need to confirm their trade decisions. As well, there are plenty of specialized software programs available to make simple buy and sell recommendations.

Chris Blanchet has more than 16 years of experience as a Financial Advisor. As the Fund Advisor for Mutual Fund Site, he was instrumental in helping people determine Where To Invest