Archive | Research Papers RSS feed for this section

Using SP-500 new-lows to gauge stock market risk

Download article as PDF The “NewLo” index devised by RecessionALERT, is a count of how many support failures has occurred in a current SP-500 correction. It can be used to gauge the odds of a correction having seen the worst (being over) or the odds of a bear market. To calculate the NewLo count, we […]

Read full story · Comments { 6 }

The SP-500 200-day average “Goodbye Kiss”

Download article as PDF The SP-500 today has met back with its 200-day moving average after spending a “protracted period” of 46 trading days below it. Contrary to popular belief, history since 1972 shows this to be a bearish event, with more downside likely. Many participants on the stock markets like to use the 200-day […]

Read full story · Comments { 3 }

Global Slowdown – Does it affect the U.S?

Download article as PDF There is no question that the Global Economy is languishing. Now, with weakness in US economic data starting to filter through, the big question that arises is if the U.S will be dragged down by the global economy. The U.S is a very insular economy and whilst there can be no […]

Read full story · Comments { 2 }

RecessionALERT Valuation Index (RAVI)

Download article as PDF There are currently 4 mainstream models used to forecast 10-year total returns on the SP-500 (dividends re-invested) The Shiller CAPE ratio (PE10) The Warren Buffet Indicator Tobin’s Q-Ratio Average Investor allocation to stocks The non-linear quarterly correlations between these four models (x-axes) and achieved 10-year future total returns (y-axes) on the SP-500 […]

Read full story · Comments { 1 }

Great Trough Detector Improvements

Download article as PDF You will notice a new layout for the Great Trough Detector (GTR) chart as shown below. The Signal Panel has been revised to be more intuitive and we have added a new count panel below that: 1. The Signal Panel The first task of this panel is to highlight your two […]

Read full story · Comments { 0 }

The HiLo Breadth Indexes for SP-500

Download article as PDF The HILO breadth index was developed  by RecessionALERT for detecting short and  medium-term SP-500 stock market peaks in advance. It deploys the following daily breadth data taken from the SP-500 index: New 13-week (quarterly) highs New 13-week (quarterly) lows New 52-week (annual) highs New 52-week (annual) lows The above data is […]

Read full story · Comments { 0 }

Zweig Breadth Thrust – The RecessionALERT Redux

Download article as PDF Martin  Zweig was an American stock investor, investment adviser, and financial analyst. According to Forbes Magazine, he was renowned for his “eccentric and lavish lifestyle” as well as having had the most expensive residence in the United States at the time, atop The Pierre on Fifth avenue in Manhattan.  He was […]

Read full story · Comments { 0 }

Measuring Selling Pressure for Market Entry Timing

Download article as PDF This project uses a composite approach to constructing a broad representation of selling pressure on the SP-500 Index, for the purposes of gauging intensity of corrections, identifying ideal buying points for “buy on the dip” opportunities and provision of warnings of oncoming corrections. The motivation behind using many measurements for selling […]

Read full story · Comments { 1 }

SuperCycle Seasonal Timing Methodology for the SP-500

Download article as PDF MODEL UPDATE – 21 October 2013 The long-only strategy (STM L) is performing 1.7 times that of the SP-500 buy-&-hold whilst the long and short strategy (STM L+S)  is performing 3.1 times that of the SP-500 buy-&-hold since January 2009 (latter part of 2007-2013 out-of sample period.) Both models under-performed the […]

Read full story · Comments { 0 }

Seven Paw-prints of the Bear

Download article as PDF For decades, investors have sought out methods to detect oncoming bear markets. With this current bull market now in its 5th year the subject has become even more topical – “Has the bull market still got legs?” is a question pondered every day by millions of investors. In this research note, […]

Read full story · Comments { 3 }

The SP500 Market Timing project

Download article as PDF Currently, RecessionALERT subscribers deploy the Recession Forecasting Ensemble (RFE) to match  their equity allocation to recession risk. But the assumption in our RFE research note was that you would simply “buy and hold” the stock market during periods of low recession risk. This provided for far superior risk-adjusted returns across many […]

Read full story · Comments { 1 }

Estimating recession probabilities using Gross Domestic Product & Income

Download article as PDF ” The NBER does not define a recession in terms of two consecutive quarters of decline in real GDP. Rather, a recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail […]

Read full story · Comments { 0 }

Structural distortions hazardous to recession forecasting

Download article as PDF Very few people realise just how close we came to a recession in the past 12 months, purely on an economic indicators perspective and not counting external risks such as the Fiscal Cliff debate. However, many traditional long leading indicators based on for example the yield curve and the unemployment rate, […]

Read full story · Comments { 0 }

Effects of Revisions on Recession Forecasting

Download article as PDF Economic time series used in measuring business cycles and forecasting recessions are subject to revisions and re-benchmarking. Over time, more up-to-date and accurate data become available and time series are revised to reflect the updates. Some economic time series are subject to more drastic revisions than others. For example, the unemployment […]

Read full story · Comments { 0 }

The NBER co-incident Recession Model – “confirmation of last resort”

Download article as PDF NOTE : AFTER READING THIS, ALSO TAKE A LOOK AT : “The effect of data revisions on the NBER recession model” and “Estimating Recession Probabilities using GDP/GDI” The National Buro for Economic Research (NBER) are the final arbiters of recession dating in the U.S. They take forever to proclaim specific starts and […]

Read full story · Comments { 0 }

Recession Forecasting Ensemble (RFE) and market timing

Download article as PDF The Recession Forecasting Ensemble (RFE) is a collection of 6 powerful diversified recession forecasting methodologies that differ in data, mechanics, approach and theory to offer us an over-arching recession dating and forecasting methodology that is resilient to individual “model risk”. There is no “one size fits all” mathematical model that performs well in […]

Read full story · Comments { 3 }

The SP-500 Great Trough Detector Project

Download article as PDF The SP-500 Great Trough Project is a technique where we deploy market breadth to determine favorable points in time for investors to “buy on the dips” on the U.S stock markets, more specifically the SP-500. We make reference to a “Great Trough” as rare, large correction reversals on the SP-500, normally spawning a new bull-market […]

Read full story · Comments { 0 }

The Shadow Weekly Leading Index Project

Download article as PDF NOTICE : The Shadow WLI Project has been running since 1st June 2012 and we consider the out-of-sample results to be a resounding success from the accuracy charts below.  We update the public charts on these pages from time to time, but regular updates are part of a RecessionALERT annual subscription. […]

Read full story · Comments { 1 }

Predicting recession with U.S state co-incident indicators

Download article as PDF Common knowledge tells us that to forecast recession with some lead (advance warning) means we need to use leading indicators. However a special characteristic of  the 50 state-wide co-incident indicators maintained by the Philadelphia Fed allows us to build an early warning system for recessions. In our previous research titled “Dating NBER Recessions […]

Read full story · Comments { 0 }

A Stylized Approach to Recession Forecasting

Download article as PDF The traditional method for recession forecasting is to find an economic indicator or composite index that has a high correlation  and adequately responds in advance to economic expansion or contraction. One then de-trends this indicator by taking a growth rate (straight or smoothed) over x-months and plotting that on a chart. […]

Read full story · Comments { 0 }