Posts Tagged ‘economic indicators’

The Albert Edwards Exploration Diary, Day 423

Joshua M Brown found the latest entry in the diary of a frustrated bear in search of negative data showing the economy is headed for a downturn in The Albert Edwards Exploration Diary, Day 423. – Ilene 

Courtesy of Joshua M Brown, The Reformed Broker 

2 Decembre Anno Domini 2010

This morning I awoke to a cable from the nearest village informing me that Cyber Monday shopping stateside broke all kinds of records.  I’ve also been informed that PMIs from around the world are now in expansionary territory in unison.  Even jobs data is getting a tiny bit better, week by week…

But still I forge ahead.  I will scour the ends of the earth to find indicators that cast economic conditions in a negative light.  I will climb the highest peaks and plumb the depths of the Seven Seas in search of Depressionary evidence – no matter how obscure.  I will measure the second derivative change in Chinese eel sales on the wharves of Tianjin.  I will document the savings rates of retired sailors in Marseilles.  I will stop at nothing to make the numbers agree with my orneriness – this I swear to you, faithful client of Societe Generale.

Although my employer SocGen, the bankroller of my exploration, appears to be losing faith in my stubborn jeremiads, I must continue until I am proven correct.  I must plow on in my search for negative data until I am vindicated, even if global markets triple and quadruple before the next down cycle.

One day, the recovery will falter.  And on that day, I will be redeemed.

Yours in Perma-Bearishness,


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The ECRI Weekly Leading Index

The ECRI Weekly Leading Index 

Courtesy of Doug Short 

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) registered negative growth for the 15th consecutive week, coming in at -9.2, a slight improvement over last week’s -10.1. The index had been hovering around -10 for the previous five weeks. The latest weekly number is based on data through September 10.

The magnitude of decline from the peak in October 2009 is unprecedented in the Institute’s published data back to 1967. Recently, however, the Institute has disclosed that two earlier decades of data not available to the general public contained comparable declines in WLI growth (in 1951 and 1966) when no recession followed (HT Barry Ritholtz).

The Published Record

The ECRI WLI growth metric has had a respectable (but by no means perfect) record for forecasting recessions. The next chart shows the correlation between the WLI, GDP and recessions.

A significant decline in the WLI has been a leading indicator for six of the seven recessions since the 1960s. It lagged one recession (1981-1982) by nine weeks. The WLI did turned negative 17 times when no recession followed, but 14 of those declines were only slightly negative (-0.1 to -2.4) and most of them reversed after relatively brief periods.

Three of the false negatives were deeper declines. The Crash of 1987 took the Index negative for 68 weeks with a trough of -6.8. The Financial Crisis of 1998, which included the collapse of Long Term Capital Management, took the Index negative for 23 weeks with a trough of -4.5.

The third significant false negative came near the bottom of the bear market of 2000-2002, about nine months after the brief recession of 2001. At the time, the WLI seemed to be signaling a double-dip recession, but the economy and market accelerated in tandem in the spring of 2003, and a recession was avoided.

The Latest WLI Decline

The question, of course, is whether the latest WLI decline is a leading indicator of a recession or a false negative. The published index has never dropped to the current level without the onset of a recession. The deepest decline without a near-term recession was in the Crash of 1987, when the index slipped…
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July Seasonally Adjusted Retail Sales “Mixed Bag”; Manufacturing Output Rises Led by Auto Sector

July Seasonally Adjusted Retail Sales "Mixed Bag"; Manufacturing Output Rises Led by Auto Sector

Courtesy of Mish

Excluding autos and gas retail sales ran out of steam in July 2010. Please consider the SpendingPulse Report July Retail Sales Show Mixed Results.

After several months of sales slowdown, total retail sales have stabilized somewhat, although overall growth has slowed sharply since earlier this year. In fact, growth in July headline numbers was driven largely by an increase in spending on gasoline, which is why the ex-auto ex-gasoline number is a better barometer to measuring the underlying health in retail spending.

July’s growth rate excluding auto and gasoline leaves the three-month average year-to-year growth rate of retail sales at 1.0%, well below the 3.5% for the prior three months. The ex-auto year-over-year numbers tell a similar story of a shallow and stabilizing trough, with the unadjusted three-month average year-over-year growth rate slowing to 1.6% compared to the 6.5% average growth rate for the previous three months.

The first table above compares June and July 2010 vs. the same month in 2009.

The second table shows July 201o vs. June 2010 seasonally adjusted. For an alleged recovery, these are weak numbers.

Industrial Production up 1 Percent, Led by Autos

Inquiring minds are taking a look at the July Federal Reserve Industrial Production and Capacity Utilization report.

Industrial production rose 1.0 percent in July after having edged down 0.1 percent in June, and manufacturing output moved up 1.1 percent in July after having fallen 0.5 percent in June. A large contributor to the jump in manufacturing output in July was an increase of nearly 10 percent in the production of motor vehicles and parts; even so, manufacturing production excluding motor vehicles and parts advanced 0.6 percent.

The production of consumer goods moved up 1.1 percent, as the output of consumer durables jumped 4.9 percent: Production for all of its major components advanced. In addition to a gain of 8.8 percent in the output of automotive products, which was mainly due to a large increase in light truck assemblies, the indexes for home electronics and for miscellaneous goods increased 1.3 and 1.5 percent, respectively; the index for appliances, furniture, and carpeting moved up 0.5 percent.

Among components of consumer nondurables, the output of non-energy nondurables declined 0.2 percent, and the output of consumer energy products moved up

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Boston train wreck

Courtesy of The Pragmatic Capitalist

Via David Rosenberg at Gluskin Sheff:

1. The ECRI weekly leading index growth rate peaked on October 9, 2009 (at 28.54%; now at 9.0%).

2. The Conference Board’s LEI peaked at 109.4 in March (109.3 in April).

3. ISM orders/inventory ratio peaked at 1.805 in August 2009 (1.33 in April).

4. University of Michigan consumer expectations peaked on September 2009 (at 73.5) – now at 65.3 in May.

5. The UofM index of big-ticket consumer purchases peaked in February-March at 136; is down to 129 as of May.

6. Jobless claims bottomed at 442k on March 11.  They had peaked at 651k on March 28, 2009.  But they are back at 471k, which is where they were back on December 19, 2009 so the improvement has stalled out.  Not only that, but to keep 472k into perspective, claims were at 453k the week after 9/11 (and the economy back then was eight months into recession).  Yes, yes, employment has been rising of late; however, keep in mind that nonfarm payrolls are in the index of coincident indicators; claims are in the index of leading indicators.  Please let’s not drive looking through the rear window.

7. Single-family building permits peaked at 542k (annual rate) in March (were 484k in April).

8. Mortgage purchase applications peaked on April 30th at 291.3 and now are at a 13-year low of 192.1 even though mortgage rates have come down 20 basis points since the nearby high.

9. Auto production peaked at 7.8 million units (seasonally adjusted annual rate) in January – was at 7.2 million in April.

10. Electrical utility output was down 0.1% YoY as of May 15th.  Could be another early sign that the production revival is behind us.

Source: Gluskin Sheff 

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GDP Contraction Coming In Second Quarter 2010?

GDP Contraction Coming In Second Quarter 2010?

Courtesy of Mish

I have been speaking with Rick Davis at the Consumer Metrics Institute about leading economic indicators. Davis claims his data leads the GDP by about 17 weeks while noting that other so-called "leading indicators" are merely a reflection on the stock market and yield curve.

Davis captures his data solely from online transactions of real consumers, in real time.

Here are a four charts. The first chart shows the Consumer Conference Board LEI, not the Consumer Metrics Index.

Consumer Conference Board LEI vs. S&P 500

Davis writes:

Is the conference board LEI really leading anything or is it merely a reflection of the stock market? A look at the actual values of the LEI and the S&P 500 over the last four years confirms the indicator is really a coincident indicator for the equity markets, published once a month, three weeks in arrears.

Weighted Composite Index (WCI) vs. S&P 500

The above chart shows the Consumer Metrics Weighted Composite Index (WCI) vs. the S&P 500 Index. Watch what happens when the above data is offset by 5 months.

WCI vs. S&P 500 Shifted 5 Months

The Consumer Metrics website shows most of the WCI components advancing. However, housing and consumer spending account for roughly 60% of the index and those are contracting.

It is hard to make a case on the basis of so little data, but at least since 2006 we see evidence of actual leading.

However, the stock market does not always follow the economy nor is the stock market a leading indicator of the economy.

Please see Is the Stock Market a Leading Indicator? for a discussion.

Thus, as interesting as the above chart may be, I would not recommend using Consumer Metrics Data to project stock market movements. However, when a stock market is as lofty as this one, and a recovery is priced in that is not likely to happen, I would expect the stock market to decline if the economy tanks.

Daily Growth Index (DGI) vs. BEA GDP

The above chart shows Consumer Metrics Daily Growth Index (DGI) plotted against GDP.

According to Davis the DGI is 91-Day moving average of the WCI that corresponds to a trailing ‘quarter’, and is translated from a 100-base number into a +/- percentage. For example 99 on the WCI would roughly correspond…
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Market News

News You Can Use From Phil's Stock World


Financial Markets and Economy

Tallying Terror's Economic Toll (Bloomberg)

How do you measure the impact of terrorism on economic growth?

Shake Shack shares fall as early investors get chance to cash out (Business Insider)

Burger chain Shake Shack Inc's <SHAK.N> shares fell as much as 11.3 percent on Thursday after the company said it would convert about 21 million of its Class B shares into Class A shares, allowing pre-IPO investors to cash out.

The investors, including top shareholder Leonard Green & Partners LP,...

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Blodget on Market History


Outside the Box: Blodget on Market History

By John Mauldin

I remember the first time I walked into Henry Blodget’s new startup, Business Insider, back in 2009. Twelve fresh-faced kids were crammed into a room about the size of my bedroom, pounding away on laptops, creating a new destination website. He took me over to a corner; we sat down in front of a few cameras; and he began shooting question after question at me, later turning the session into a series of interviews.

You walk into his office today and it’s still packed wall-to-wall with fresh-faced kids (the older I get the younger they look), but the offices are much larger, and it seemed to me last time that there had to be at least 150 people in them. But the interviews are still quick-paced, even if they’re now conducted in a special room, with upgraded equipmen...

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Zero Hedge

Dollar Demolition Extends To 6th Day As EM/Asian FX Soars Most In Over 6 Years

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

As the odds of a Fed rate-hike this century drift asymptotically back towards zero, the stability-desirous central bankers of the emerging world are suddenly facing soaring currencies as hot money floods back into Emerging Asian markets. The Rupiah and Ringgit are up almost 3% overnight as everything from the Baht to the Won are surging against the USD. Asian FX is up 6 straight days against the USD (and 8 of the last 9) for the biggest 9-day gain since May 2009.

The China devaluation spike in The USD against Asian FX is rapidly being unwound...


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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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Kimble Charting Solutions

S&P 500…Stuck in this zone, welcome to the “Chop House!”

Courtesy of Chris Kimble.


What do S&P 500 bull and bears have in common? There opportunities are being limited by a tight range!

I started sharing with members several weeks ago that the patterns suggested the S&P would be in a “Chop House” environment for a while and that I doubted bulls nor bears would be that happy of campers.

In this type of an environment, unless you are really quick, nimble and accurate, its a time and place to take it easy and let this play out. For the majority of traders, the distance between the close on 8/25 at 186 and the close of 200 on 9/16...

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Whitney Tilson On LL, EXACT, And Martin Shkreli


Whitney Tilson On LL, EXACT, And Martin Shkreli

Courtesy of Value Walk

1) The shares of one of my largest short positions (~3%), Exact Sciences, crashed by more than 46% yesterday. Below is the article I published this morning on SeekingAlpha, explaining why I think it’s still a great short and thus shorted more yesterday. Here’s a summary:

  • The U.S. Preventative Services Task Force’s Colorectal Cancer Screening Draft Recommendation issued yesterday is devastating for Exact Sciences’ only product, Cologuard.
  • I think this is the beginning of the end for the company.
  • My price target for the stock a year from now is $3, so I shorted more yes...

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Chart School

Yesterday's Losses Reversed

Courtesy of Declan.

Bulls can be happy with today's progress. What weakness emerged today was reversed by the close, a change on yesterday's action where sellers dumped in the last few minutes of trading. Volume climbed to register an accumulation day.

The S&P finished at the 50-day MA, but beyond that there is plenty of room beyond that to run to the next level of resistance at 2,045. Technicals are net bullish.

The Nasdaq pushed off its 20-day MA and has another 50 points of maneuver before it gets to its 50-day MA.  Technicals are not yet net bullish, but they are close.


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Sector Detector: Searching for solid support in the face of global headwinds

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

Courtesy of Sabrient Systems and Gradient Analytics

Uncertainty about the health of the global economy led investors to flee U.S. equities during Q3, primarily driven by worries about China's growth prospects and the Federal Reserve’s decision to not raise rates. Sure, there are plenty of real and perceived headwinds, but on balance it seems that a recession here at home is not in the cards. And when you consider sentiment and the technical picture, it appears that a continuation of Friday’s bounce is in store. The question remains as to whether the seasonally strong Q4 will be able to propel the bulls through levels of resistance that have built up.

In this weekly update, I give my view o...

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Swing trading portfolio - week of October 5th, 2015

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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Baxter's Spinoff

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

Baxter Int. (BAX) is splitting off its BioSciences division into a new company called Baxalta. Shares of Baxalta will be given as a tax-free dividend, in the ratio of one to one, to BAX holders on record on June 17, 2015. That means, if you want to receive the Baxalta dividend, you need to buy the stock this week (on or before June 12).

The Baxalta Spinoff

By Ilene with Trevor of Lowenthal Capital Partners and Paul Price

In its recent filing with the SEC, Baxter provides:

“This information statement is being ...

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Mapping The Market

An update on oil proxies

Courtesy of Jean-Luc Saillard

Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself. 


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Watch the Phil Davis Special on Money Talk on BNN TV!

Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show live on Wednesday night (it was recorded on Monday). As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. ~ Ilene


The replay is now available on BNN's website. For the three part series, click on the links below. 

Part 1 is here (discussing the macro outlook for the markets) Part 2 is here. (discussing our main trading strategies) Part 3 is here. (reviewing our pick of th...

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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 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.

Thank you for you time!

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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