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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 [...]

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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 [...]

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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 [...]

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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 [...]

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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, [...]

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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 [...]

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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 [...]

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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, [...]

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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 [...]

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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 [...]

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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 [...]

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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 [...]

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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. [...]

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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 [...]

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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. [...]

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Recession: Just How Much Warning Is Useful Anyway?

Download article as PDF At the end of September 2011, ECRI made a recession call which left the impression recession was imminent. With a track record like theirs there was very little challenging argument. Two days later, the S&P-500 bottomed and rose and incredible 22% since. In December 2011, ECRI “dialled down” their call to [...]

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The New Conference Board LEI: First Look

Download article as PDF The much anticipated Conference Board LEI revision is out. Many people were fearing that the removal of M2 from the composite would plunge it into recession territory, but that is not the case. Our own investigations into this matter in the lead up to the announcement revealed as such, but it [...]

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Further Improving the Use of the ECRI WLI (Part-II)

Download article as PDF This article was co-authored with Georg Vrba and first appeared on the popular Advisor Perspectives web site on 17 January 2012 In our last article on using the ECRI WLI, we described how best to use the growth figure of the Economic  Cycle Research Institute’s Weekly Leading Index (WLI) to predict recessions,  [...]

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Using the ECRI WLI to Flag Recessions (Part-I)

Download article as PDF In September 2011, the Economic Cycle Research Institute  proclaimed a new U.S recession would begin sometime in the coming year. ECRI  based its prediction on a host of its own internal long-leading indexes,  together with its widely followed weekly leading index (WLI). I do not wish to debate the merits of [...]

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Dating NBER Recessions with Philadelphia Fed State coincident indices

Download article as PDF Further exploration of the work done by Jason Novak, “Marking NBER Recessions with State Data”, Feb 2008 available from http://www.philadelphiafed.org. We extrapolate Novak’s diffusion-based recession dating model to include the 2008 great recession to gauge its “out of sample” effectiveness. We then explore an alternative method to diffusion in using state [...]

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