This week s BCI does not signal a recession in the near future.

Size: px

Start display at page:

Download "This week s BCI does not signal a recession in the near future."

Gwendolyn Strickland
5 years ago
Views:

1 Business Cycle Index The BCI dropped to from last week s upward revised level of BCIg, the smoothed annualized growth of BCI, is also down at 16.2 from last week s This week s BCI does not signal a recession in the near future. Summary : The IBH stock market model is out of the market. The MAC stock market model is invested, the bond market model avoids high beta (long) bonds, the yield curve is steepening, the gold and silver models are invested. The recession indicator COMP is lower from last week s level, and im-bcig is also lower from last week s level. MAC-AU is invested. Stock-market: The IBH-model is out of the market as shown in Fig. 1. A sell signal was generated 59 weeks ago when the WLIg_shortEMA moved below the WLIg_longEMA. Currently the WLIg_shortEMA indicator has almost the same level as the WLIg_longEMA. If the sell signal was correct then WLIg_shortEMA should move decisively below WLIg_longEMA, which is currently not the case. However, had it not been for this sell signal, the model would have generated another sell signal on Sep A Sell-C signal was generated on during week ending 11/15/13. The IBH-model is described here and the latest rules can be found here. The MAC-US model stays invested. MAC-US Fig 2 shows the spreads of the moving averages. The sell-spread is fractionally lower from last week s level. A sell signals is not imminent. The sell spread (red graph) has to move below the zero line for a sell signal. The MAC-AU model stays invested. MAC-AU Fig 2.1 shows the spreads of the moving averages of the Australia All Ordinaries Index. The sell-spread is near last week s level. The sell spread (red graph) has to move below the zero line for a sell signal. This model and its application is described in MAC-Australia: A Moving Average Crossover System for Superannuation Asset Allocations. Recession: In Fig. 3 one can see that COMP is fractionally lower than last week s level, and far away from signaling recession. COMP can be used for stock market exit timing as discussed in this article The Use of Recession Indicators in Stock Market Timing. Fig. 3.1 shows our recession indicator im-bcig, lower than last week s level. It is possible that BCIg may have peaked in June. A recession is not imminent as one can clearly see. Bond-market: The BVR-model avoids high beta bonds (long-bonds) and also intermediate duration bonds.

2 The Bond Value Ratio is shown in Fig 4. The BVR is near last week s level. According to the model, only when BVR turns upward after having been lower than the lower offset-line should one consider long bonds again. The Yield Curve: The yield curve model shows the steepening trend of the 1-year and 2-year Treasuries yield spread. Figure 5 charts (i1 i2). The general trend is up, as one can see, although the yield curve has flattened recently. FLAT and STPP are ETNs. STPP profits from a steepening yield curve and FLAT increases in value when the yield curve flattens. This model confirms the direction of the BVR. Gold: The modified Coppock Gold indicator is shown in Fig 6. This model has been out of Gold since Nov but is now invested. This indicator is described in Is it Time to Buy Gold Again? - Wait for the buy signal... Silver: The modified Coppock Silver indicator shown in Fig 7 and is currently invested. This indicator is described in Silver - Better Than Gold: A Modified Coppock Indicator for Silver. Monthly Updates Unemployment The unemployment rate recession model has been updated with the April UER of 6.3%. Here is the link to latest update. Coppock Indicator for the S&P5 The Coppock indicator for the S&P5 generated the last interim buy signal on January 31, 214. This indicator is described here and now signals investment in the S&P5 to the end of 214, unless the S&P5 gains 38% over shorter period. TIAA Real Estate Account Currently the 1-year rolling return is 9.41%. A sell signal is not imminent. Read more

3 1/1/9 1/1/1 1/1/11 1/1/12 1/1/13 1/1/14 Fed Funds Rate %, S&P5 /25 WLIg, slope WLIg, slope WLI, FRR Please note: Past performance does not guarantee future returns, investments may increase or decrease in value and you may lose money using this model BUY A Figure 1 : Fed Funds Rate, S&P 5, FRR, WLIg, slope WLIg, slope WLI Sell SELL SELL SELL basic & A SELL C BUY A BUY C basic & A BUY A BUY C basic & A basic & A SELL C Forward Rate Ratio 2-1 2d_Slope_WLI_longEMA+1 BUY A updated to.5/2/ d_Slope_WLIg_longEMA+1 WLIg_short_EMA WLIg_long_EMA d_Slope_WLIg_long_EMA S&P5/ Federal Funds Rate published = 5/2/14 WLI = WLIg =..4.2% +.8% WLIg = ECRI Weekly Leading Index growth/2 +1 WLI = (ECRI Weekly Leading Index -5)/1 IBH.xlsm

1/1/9 1/1/1 1/1/11 1/1/12 1/1/13 1/1/14 S&P 5 Spread Please note: Past performance does not guarantee future returns, investments may increase or decrease in value and you may lose money using this

4 1/1/9 1/1/1 1/1/11 1/1/12 1/1/13 1/1/14 S&P 5 Spread Please note: Past performance does not guarantee future returns, investments may increase or decrease in value and you may lose money using this model. Figure 2: Buy and Sell signals for S&P from the modified golden-cross MAC system 19 recession S&P5 updated to 5/2/ buy signal sell signal buy-spread= 34d EMA - 2d EMA*1.1 sell-spread= 4d MA - 2d MA zero MAC.xlsm

5 1/1/9 1/1/1 1/1/11 1/1/12 1/1/13 1/1/14 Australia All Ordinairies Index Spread Please note: Past performance does not guarantee future returns, investments may increase or decrease in value and you may lose money using this model. Fig 2.1: Buy and Sell signals for the Australia All Ordinaries Index from the MAC-AU System updated to May Sell Spread Buy Spread Australia All Ordinaries Index MAC Australia.xlsm

1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 21 23 25 27 29 211 213 215 COMP 8 6 Fig. 3: COMP Leading Indicator of US Economy 1969-214 COMP level on 4/11/14 = 29.

6 COMP 8 6 Fig. 3: COMP Leading Indicator of US Economy COMP level on 4/11/14 = COMP level on 4/18/14 = COMP level on 4/25/14 = 3.27 COMP level on 5/2/14 = 3.62 current level of COMP= 3.62 recession COMP last COMP level recession trigger Note: Some of the levels of COMP may differ from previous releases due to revisions of COMP's components recession trigger line -4-6 COMP.xls

1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 21 23 25 27 29 211 213 215 im-bcig 5 4 Fig 3.1: im-bcig 1969-213 level on 4/11/14 = 17.71 level on 4/18/14 = 17.

7 im-bcig 5 4 Fig 3.1: im-bcig level on 4/11/14 = level on 4/18/14 = level on 4/25/14 = level on 5/2/14 = recession im-bcig end level recession trigger 3 current level recession trigger -2 BCIg has exceeded the current level 18.6% of the time from 1969 to present. -3 BCIg Toni.xlsm

8 1/1/5 1/1/6 1/1/7 1/1/8 1/1/9 1/1/1 1/1/11 1/1/12 1/1/13 1/1/14 BVR Note: Past performance does not guarantee future returns, investments may increase or decrease in value and you may lose money using this model. Figure 4: Bond Value Ratio (BVR) from 26 to upper offset limit +.1 lower offset limit -.1 Model updated to: 5/2/14 BVR = recalibrated on 3/26/213 upper switch point: sell high beta bond fund, buy low beta bond fund upper offset limit line BVR best-fit line BVR lower offset limit line lower switch point: sell low beta bond fund, buy high beta bond fund BVR.xlsm fig4 BVR6-14

9 1/1/9 1/1/1 1/1/11 1/1/12 1/1/13 1/1/14 i1 - i2 Note: Past performance does not guarantee future returns, investments may increase or decrease in value and you may lose money using this model. Figure 5: i1 - i2 Updated to..5/2/ buy FLAT buy STPP i1-i2 EMA (i1-i2) (i1 - i2) the difference btw. 1 - & 2 yr T-note yields has a negative slope, meaning (i1 - i2) is becoming smaller. buy STPP ( ) (i1 - i2) has a positive slope, meaning (i1 - i2) is becoming bigger. buy FLAT.2 Yield Curve.xlsm 9-14

10 Gold Price $/oz Coppock indicator Figure 6: Modified Coppock Indicator for Gold updated to 5/2/214 period in gold buy signals yoy RRC% stdev gold price 12 coppock indicator line= $ New Buy Signal $ COPPOCK GOLD for updates.xlsm

11 Silver Price $/oz Coppock indicator Figure 7: Modified Coppock Indicator for Silver updated to 5/2/214 Buy price $23.54 period in silver buy signals yoy RRC% stdev silver price 2 coppock indicator 16 line= $

12 Unemployment Rate (UER) % /1/ 1/1/1 Unemployment Rate and Recessions (real-time) Leads to recession starts and to recession ends are positive numbers in weeks, lags are negative numbers /1/2 1/1/3 1/1/4 4 Recession Recession Signal UER shortema UER longema UERg -12 1/1/5 updated to with April UER= 6.3% 19-wk rate of change UER Lead to rec. start - weeks Lead to rec. end - weeks 1/1/6 1/1/7 8 1/1/8 1/1/9-2 1/1/1 1/1/11 UER shortema is below UER longema, no recession possibility. Spread= -.55% 1/1/12 UERg= % 1/1/13 1/1/14 1/1/ Growth of UER (UERg) & 19-wk rate of change UER 5/2/14

13 S&P5 Coppock indicator updated to 5/2/214 Modified Coppock Indicator for S&P New interim buy signal Jan period in S&P5 buy signals yoy RRC% stdev S&P5 8 coppock indicator line=

14 TIAA Real Estate Account vs. Vanguard REIT Index Fund (VGSIX) updated to 5/1/14, current 1-year rolling return= 9.41% 55 recession 7 TIAA Real Estate norm. TIAA Real Estate & VGSIX normalized to 1 (1/1/2) Vang REIT Index Fund VGSIX norm. Sell TIAA Real Estate Buy TIAA Real Estate 1-yr Rolling Return TIAA Real Estate Sell TIAA Real Estate REIT VGSIX norm. 1-yr Rolling Return TIAA Real Estate 1/1/ 1/1/1 1/1/2 1/1/3 1/1/4 1/1/5 1/1/6 1/1/7 1/1/8 1/1/9 1/1/1 1/1/11 1/1/12 1/1/13 1/1/14 1/1/15 TIAA Real Estate norm. Buy TIAA Real Estate yr Rolling Return TIAA Real Estate -4 Vang REIT Index VGSIX vs TIAA Real Estate for updates.xls TIAA vs REIT norm

The 3-mo Hi-Lo Index of the S&P500 is below last week s level at 4.50% (last week 4.62%) and is out of the market since 8/22/2017.

The 3-mo Hi-Lo Index of the S&P500 is below last week s level at 4.50% (last week 4.62%) and is out of the market since 8/22/2017. August 31, 217 Business Cycle Index The BCI at 226.6 is below last week s 227.3, the BCIp is at 94.6. Also, the 6-month smoothed annualized growth BCIg is at 14.9, which is below last week s 15.3. No recession