Posts Tagged ‘ECRI Weekly Leading Index’

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 14th consecutive week, coming in at -10.1, a fractional improvement over last week’s -10.2, which was a downward revision from -10.1. So this index has essentially hovered around -10.1 for the past five weeks. The latest weekly number is based on data through September 3.

The rate 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 turn 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…
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ECRI’s Lakshman Achuthan Still Blowing Smoke

ECRI’s Lakshman Achuthan Still Blowing Smoke

Woman Smoking

Courtesy of Mish 

Lakshman Achuthan and Anirvan Banerji, co-founders of ECRI maintain the ECRI’s WLI Weekly Leading Index (Still) Widely Misunderstood

I am going to cut to the chase because all Achuthan and Banerji did in that piece is blow smoke without addressing the critical issue. Here is the key paragraph.

It’s true enough, based on the four decades of publicly available data, that WLI growth has never dropped this far without a recession. What most don’t know – apart from the fact that the WLI growth rate shouldn’t be used to predict recessions in the first place – is that, based on two additional decades of data not available to the general public, there are a couple of occasions (in 1951 and 1966) when WLI growth fell well below current readings, but no recessions resulted.

ECRI Still Has Explaining To Do

Lakshman Achuthan chastised Rosenberg in the above article (but not by name) for doing exactly what the ECRI did: Propose the WLI can be used to predict recessions.

I documented proof of that in ECRI Weekly Leading Indicators at Negative 9.8; Has the ECRI Blown Yet Another Recession Call?

Just The Facts Maam, Not The Spin

If the ECRI does not want people assuming the WLI can be used as a recession forecast, then perhaps they ought not present it that way.

Please consider some charts and text from the ECRI publication The Great Recession and Recovery:

ECRI Weekly Leading Index

"This is an index that’s been around for over a quarter of a century, and over that time (shown here) it has correctly predicted every recession and recovery in real-time."

I need to repeat that, over this entire time period, I was present to see each of the correct recession and recoveries calls in real-time, without false signals in between.

ECRI Clearly Touts the WLI’s Recession Prediction Capabilities

Please read the preceeding two paragraphs in italics slowly and carefully.

Lakshman Achuthan and Anirvan Banerji defense of the ECRI is that the WLI cannot be used to predict recession, yet in a blatant attempt to promote the WLI, the ECRI did just that!

Supposedly the WLI in "real-time" has correctly predicted every recession without a single false signal. Quite frankly that was a blatant attempt by the ECRI to promote the WLI’s recession prediction ability.…
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Phil's Favorites

Why it matters when big tech firms extend their power into media content

 

Why it matters when big tech firms extend their power into media content

Courtesy of David HesmondhalghUniversity of Leeds

Shutterstock

A major shift is taking place in global media. Until recently, tech corporations were mainly involved in distribution rather than production. But now, instead of simply delivering TV shows, music and films onto our devices and screens, major firms are sinking huge amounts of money into the content itself.

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The two obstacles that are holding back Alzheimer's research

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

 

The two obstacles that are holding back Alzheimer's research

Courtesy of Todd GoldeUniversity of Florida

Family members often become primary caregivers for loved ones with Alzheimer’s disease. tonkid/Shutterstock.com

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Back-To-Back Hindenburg Omens

Courtesy of ZeroHedge. View original post here.

About a week ago, we warned about the infamous bearish stock market pattern developing in US equities coined by some as the ‘Hindenburg Omen’. The pattern is known for its bearish tendencies developed after the Hindenburg disaster of 1937. The key understanding is breadth deterioration, when more stocks hit 52-week lows than 52-highs. Since the warning, a liquidity gap has developed in stocks thwarting any attempt at new all time highs.

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Digital Currencies

The blockchain does not eliminate the need for trust

 

The blockchain does not eliminate the need for trust

Courtesy of Dirk BaurUniversity of Western Australia and Niels Van QuaquebekeKühne Logistics University

Central authorities are still important to create legitimacy in a cryptocurrency. Shutterstock

A common idea about the blockchain, the technology that powers Bitcoin and other cryptocurrencies, is that it can “...



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Chart School

When does this all end - Update2

Courtesy of Read the Ticker.

To buy or not to buy: The US 10 year versus high yielding utility stocks.

Previous Post: When does this all end - Update

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NI Source (Dow Jones Utility: NI) dividend @ 2.58%
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10 Stocks To Watch For November 17, 2017

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ValueWalk

Robert Mugabe Under House Arrest, Military Takes Control Of Zimbabwe

By Andjela Radmilac. Originally published at ValueWalk.

Zimbabwe’s head of state, 93-year-old Robert Mugabe, has been placed under house arrest after what seems to be a military coup took place in the nation’s capital.

By U.S. Navy photo by Mass Communication Specialist 2nd Class Jesse B. Awalt/Released [Public domain], via Wikimedia CommonsRobert Mugabe is safe

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Swing trading portfolio - week of September 11th, 2017

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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Promotions

NewsWare: Watch Today's Webinar!

 

We have a great guest at today's webinar!

Bill Olsen from NewsWare will be giving us a fun and lively demonstration of the advantages that real-time news provides. NewsWare is a market intelligence tool for news. In today's data driven markets, it is truly beneficial to have a tool that delivers access to the professional sources where you can obtain the facts in real time.

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All About Trends

Mid-Day Update

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

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