My recession indicator, or (more accurately) my market “fear-of-recession” indicator, has reversed direction over the past several days.
In the chart below, the S&P 500 is
indicated in black and the Morgan Stanley Cyclical Index in blue. The relative performance of the two indices is
indicated by the solid red line in between the blue and black lines. That solid red line is the indicator. When the solid red line is moving up the,
cyclical stocks are outperforming the S&P 500. In general, when the red indicator line is
going down, so is the S&P 500.
Currently, cyclical stocks are falling when
compared to the S&P 500. It may be
hard to see, but the solid-red indicator line that tracks the relative
performance is falling steeply. Additionally, the indicator peaked at exactly
the same value as it did in 2011 and 2012. To make the trend clearer, I added a
black trend line on the S&P showing that it has been flat while the blue
trend line on the cyclical index shows it falling.
During the 2011 and 2012 corrections, the
indicator peaked about 6-weeks to 2-months prior to the top that preceded both corrections.
FEAR OF RECESSION CHART
MARKET RECAP
Thursday the S&P 500
was up about 0.33%, to 1414 (rounded).
VIX rose about 4% to 16.58.
VIX isn’t moving much in
either direction so the VIX indicator isn’t giving any guidance at this
point. In fact, all of the indicators
are in neutral territory. The only
cautionary indicator in the NTSM system is Sentiment. Sentiment is up to 60%-Bulls. That is in the overly-bullish, cautionary
zone. A sell indicator would be
67%-Bulls.
I have been expecting a fall back and retest of the recent low. So far…no dice.
NTSM
The NTSM analysis remained HOLD Thursday.
MY INVESTED POSITION
Based on the SELL signal, 7 November 2012, I
moved out of the stock market at 1377 on the S&P 500. Because of the extreme negativity I have
noted from Hussman and others, I am currently invested in a range of near 15%
invested in stocks and I am still holding short positions.
