From the Federal Reserve: “The Aruoba-Diebold-Scotti business conditions index is designed to track real business conditions at high frequency. Its underlying (seasonally adjusted) economic indicators (weekly initial jobless claims; monthly payroll employment, industrial production, personal income less transfer payments, manufacturing and trade sales; and quarterly real GDP) blend high- and low-frequency information and stock and flow data.”
http://www.philadelphiafed.org/research-and-data/real-time-center/business-conditions-index/
The ADS Business Conditions Index is produced by the Philly Fed. While most mainstream economists say there is
now little chance of recession, the ADS index shows a troubling trend. The trend is down and it is punctuated by
lower lows and (with one exception) lower highs. I’ve added a yellow line indicating the start
of the 2007 Great Recession and a Red line indicating the start of the 2001 recession
and arrows to help see the rate of decline compared to the prior recessions.
Since I am not an economist, and this is not a complete picture of the
economy, I’ll just leave it to you to draw conclusions. It is clearly a cause
for concern.
Since this blog covers the stock market, it is best to see what
investors think about recession, since that is the group whose opinion we
consider most important.
I track the relative strength of the Morgan Stanley Cyclical Index
compared to the S&P 500. The cyclical
stocks are most sensitive to recession and should give us some advance warning
of recession, or at least a downturn in the markets. This is similar to “DOW Theory” that tracks
the Transportation stocks for a similar reason.
Following the cyclical index just provides a bigger basket of stocks
than just transportation. Transportation
stocks are included on the Cyclical Index.
Currently the Morgan Stanley Cyclical Index is outperforming the S&P
500 by about 2% over the past 2-weeks
and it is up 6% over the same period.
Investors say there is no
chance of recession in the next quarter.
GARTMAN SAYS HE WAS WRONG – BUT REMAINS OUT
Dennis Gartman (Editor of the Gartman letter) said Monday that he was
wrong about the stock market (getting out in February), but he is not getting
back in either. “Although the stock
market rallied 3 percent since Dennis Gartman announced he had exiting
equities, the editor of The Gartman Letter said Monday on CNBC that he's
sitting out.
‘I loved stocks at one time, and I'm going to stay upon the sidelines,’
he said.”
Full story at...
http://www.cnbc.com/id/100544038
MARKET RECAP
Tuesday, the S&P 500 finished down 0.24% to 1552 (rounded). VIX rose 6%, to 12.27.
Tuesday, the S&P 500 finished down 0.24% to 1552 (rounded). VIX rose 6%, to 12.27.
NTSM
Tuesday, the NTSM analysis remained HOLD at the close.
Only the Volume indicator is positive now. That’s not a surprise since
it is a trend following indicator. Sentiment,
Price and VIX indicators are neutral.
MY INVESTED POSITION
With long-term funds, I remain about 20% invested in stocks as of 5
March, due to my risk tolerance rather than the numerical NTSM analysis. To put it bluntly, I currently have no
tolerance for risk. (If I were strictly
following the NTSM numbers, I'd still be heavily invested in stocks.) My
reasoning may be found at…http://navigatethestockmarket.blogspot.com/2013/03/why-i-got-mostly-out-of-stock-market.html
