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Posts Tagged ‘Chicago Fed National Activity Index’

Bob Bronson on the Chicago Fed National Activity Index

Bob Bronson on the Chicago Fed National Activity Index 

Courtesy of Doug Short 

Earlier today I posted some charts on the Chicago Fed National Activity Index (CFNAI). A few hours later I received an email from Bob Bronson, a market historian whose theory of market cycles — the Bronson Asset Allocation Cycle (BAAC) — I featured a few months ago.

The email included the annotated chart below with the following comment:

"While Doug Short, who does excellent work, may be reluctant to draw any conclusions from the down sloping all-data linear best-fit line, with the addition of the currently much more negatively sloped midline (line arrows) of the high-low volatility envelope, we’re prepared to claim that the sharply deteriorating growth rate combination pattern clearly shows the U.S. economy is still in the grip of an an ultimately deflationary economic Supercycle Bear Market Period Winter, which we quantify both fundamentally and technically and forecasted more than 12 years ago. Track record and explanatory documentation are available on request from Bob Bronson."

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Bob, thanks for the kind words. Yes, I’m somewhat reluctant to make a double-dip recession forecast. However, I do see it as a distinct possibility. I’ll be tracking this index over the next several months, and I’ll occasionally revisit your visual forecast to see how the numbers compare.  


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A Perspective on the Chicago Fed National Activity Index

A Perspective on the Chicago Fed National Activity Index 

Courtesy of Doug Short 

Over the past few days I’ve been studying the Chicago Fed’s National Activity Index (CFNAI), a monthly indicator designed to gauge overall economic activity and related inflationary pressure. It is a composite of 85 monthly indicators as explained in this background PDF file on the Chicago Fed’s website.

I generated the first chart below from the historical data dating from March 1967. The red dots show the indicator itself, which is quite noisy, and the 3-month moving average (CFNAI-MA3), which is more useful for showing trends. I’ve also highlighted official recessions, with the latest bounded by the St. Louis Federal Reserve’s estimated end date. The official end, of course, is the provenance of the National Bureau of Economic Analysis, which often makes its call after a year or more from the start or end. 

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The next chart highlights the -0.7 level. The latest Chicago Fed release explains:

"When the CFNAI-MA3 value moves below -0.70 following a period of economic expansion, there is an increasing likelihood that a recession has begun. Conversely, when the CFNAI-MA3 value moves above -0.70 following a period of economic contraction, there is an increasing likelihood that a recession has ended."

With the exception of the 1973-75 recession, the -0.7 level has coincided fairly closely with recession boundaries. The 1973-75 event was perhaps an outlier because of the rapid rise of inflation following the 1973 Oil Embargo. Otherwise a cross below -0.7 level has synchronized within a month or two of a recession start. A cross above the level has lagged recession ends by 2-4 months. 

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Here’s a chart of the CFNAI without the MA3 overlay — for the purpose of highlighting the high inter-month volatility. Consider: the index has ranged from a high 2.57 to a low of -4.78 with a average monthly change of 0.59. That’s 8% of the entire index range!

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In the final chart I’ve let Excel draw a linear regression through the CFNAI data series. The slope confirms the casual impression of the previous charts that National Activity, as a function of the 85 indicators in the index, has been declining since the late 1960s. I’m reluctant to draw any conclusions from the slope, but…
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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!

 
 

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The Fed Vs. Praxeology

The Fed Vs. Praxeology

By Doug French of Casey Research

Janet Yellen must feel like she’s herding cats. The Federal Reserve is keeping interest rates at zero, thinking the common man and woman will spend money or buy stocks. Dr. Yellen wants us all to get our risk on, continuing Dr. Bernanke’s instructions.

The central bank has quadrupled its balance sheet and can’t generate enough price inflation to make the monetary mandarins happy. (Some of us would say they haven’t looked hard enough.) The PhDs can’t figure it out. They’re getting no bang, for $4.5 trillion. All of those smart people armed with complicated models and the power of the printing press, and nothing’s happening except another Wall Street bubble. Yawn.

A couple of Fe...



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Chart School

Chicago Fed: Economic Growth Decelerated in August

Courtesy of Doug Short.

"Index shows economic growth decelerated in August": This is the headline for today's release of the Chicago Fed's National Activity Index, and here are the opening paragraphs from the report:

Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) decreased to –0.21 in August from +0.26 in July. Two of the four broad categories of indicators that make up the index decreased from July, and two of the four categories made negative contributions to the index in August.

The index’s three-month moving average, CFNAI-MA3, decreased to +0.07 in August from +0.20 in July, marking its sixth consecutive reading above zero. August’s CFNAI-MA3 suggests that growth in national economic activity was somewhat above its historical trend. The eco- nomic growth reflected in this level of the CF...



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Zero Hedge

This Is What Happens When Goldman Writes The Central Banker Script

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Curious what happens when Goldman writes the script for its central banker alums? This.

  • DRAGHI SAYS EXCHANGE RATE IS IMPORTANT, NOT A POLICY OBJECTIVE
  • DUDLEY SAYS VALUE OF DOLLAR CAN IMPACT APPROPRIATENESS OF MONETARY POLICY, NOT A POLICY GOAL

At this point one should just laugh.

By now it should be obvious that we have reached the Central bank, i.e., Goldman Sachs, singularity, where a few Princeton economists, MIT central-planners and Goldman partners, are desperate to micromanage everything, every single market and asset, or else watch as the house of cards is swept away by years of pent up market "efficiency."

We...



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Sabrient

Sector Detector: Bulls leverage hopeful news to launch a tepid breakout attempt

Courtesy of Sabrient Systems and Gradient Analytics

Stocks were able to leverage some optimistic news and dovish words from the Fed to take another stab at an upside breakout attempt last week. Although readers have sometimes accused me of being a permabull, I am really a realist, and the reality is that the slogans like “The trend is your friend” and “Don’t fight the Fed” are truisms. And they have worked. Nevertheless, I am still not convinced that we have seen the ultimate lows for this pullback, especially given the weak technical condition of small caps.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector ...



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OpTrader

Swing trading portfolio - week of September 22nd, 2014

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's the latest issue of Stock World Weekly. Enjoy! Please sign in using your PSW user name and password. (Or take a free trial.)

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Option Review

IV Implodes On 4-hour YHOO Options As BABA Commences Trading

Investors are dumping shares in Yahoo, sending the stock down 5.0% to $40.08 after shares in Alibaba made their debut on the floor of the NYSE just before midday. Shares in BABA for their part initially traded up to a high of $99.70, a near 47% increase over the IPO price of $68.00. Typically, one would expect put options that are 5% out of the money with roughly 4-hours left to trade to see waning implied volatility. But, at the start of the trading session and ahead of the first trade for BABA, the Sep 19 ’14 40.0 strike put options were trading with 271% volatility or $0.30 per contract amid uncertainty as to how the start of trading for Alibaba would take shape.

...

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Market Shadows

Selling PVD

Selling PVD

Administradora de Fondos de Pensiones Provida S.A. (PVD) shares will not be trading on the NY Stock Exchange after today. Tomorrow, shares will be harder to sell. Strangely, I wasn't able to find information on the internet, but Paul just sent me a copy of the email he received from Interactive Brokers.

We're selling PVD out of the Virtual Portfolio today at $87.18. 

More details:

From: Interactive Brokers   dated July 18, 2014

Holders of AFP Provida S.A. American Depository Receipts (ADR) are advised that the Company has elected to terminate the Deposit Agreement effective 2014-09-18.

As of the te...



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Promotions

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When you register for the webinar, you’ll also get instant access to following trading videos:

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Digital Currencies

Making Sense of Bitcoin

Making Sense of Bitcoin

By James Black at International Man

Despite the various opinions on Bitcoin, there is no question as to its ultimate value: its ability to bypass government restrictions, including economic embargoes and capital controls, to transmit quasi-anonymous money to anyone anywhere.

Opinions differ as to what constitutes "money."

The English word "money" derives from the Latin word "moneta," which means to "mint." Historically, "money" was minted in the form of precious metals, most notably gold and silver. Minted metal was considered "money" because it possessed luster, was scarce, and had perceive...



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Pharmboy

Biotechs & Bubbles

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Well PSW Subscribers....I am still here, barely.  From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.

First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices.  Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment.  Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer.  For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...



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