Archive | Research Papers RSS feed for this section

Global Economy affects U.S stock market returns

Download article as PDF The global economy is currently in the depths of a synchronized global business-cycle contraction, first highlighted by us in June 2018. In March 2019 we followed up with Global Economic Activity slowing at the fastest pace since 2011. The chart below highlights the Global Leading Economic Indicator together with the percentage […]

Read full story · Comments are closed

Adjusting Fed Funds Rate for QE to predict rate cycle direction changes

Download article as PDF The Federal Reserve Funds Rate (Fed Funds Rate) is the interest rate that banks charge other banks for lending them money from their reserve balances on an overnight basis. By law, banks must maintain a reserve equal to a certain percentage of their deposits in an account at a Federal Reserve bank. […]

Read full story · Comments are closed

The improved, de-trended Composite Market Health Index (CMHI)

Download article as PDF One of our oldest and most consulted indicators by our institutional clients is the Composite Market Health Index (CMHI – see research paper ). By de-trending this index around its long-term regression mean we can obtain far earlier bear-market warnings and signalling for the U.S stock markets. You can see this […]

Read full story · Comments are closed

Impact of monetary policy & yield curve on future volatility

Download article as PDF This research note investigates the relationship between the yield curve (US 10-year less US 1-year constant-maturity treasury spread) and the Federal Funds Rate (monetary policy) on the future readings of the CBOE VIX index. The 10’s vs. 1’s yield-curve and U.S recessions in the post-war era are displayed below, where it […]

Read full story · Comments are closed

A new U.S Residential Housing Index

Download article as PDF According to many market watchers, there is no better barometer on the health of the U.S. economy than residential housing. It’s an industry that encompasses many vital sectors of the economy such as banking, manufacturing, commodities, construction, durable goods, international trade, transportation and, of course, consumer spending. So it’s not surprising […]

Read full story · Comments are closed

Yield curve inversion & recession forecast

Download article as PDF There is naturally a lot of focus on the U.S yield-curve at the moment, as it moves relentlessly toward inversion (when short-term rates are higher than long-term rates.) Can the history of the yield-curve inversion provide for useful forecasting as to the start dates of the next U.S recession? The 10’s […]

Read full story · Comments are closed

Revisiting an old favourite

Download article as PDF One can examine so many charts during the course of a bull market and only realize upon hindsight how effective some of them can sometimes be. This often happens with the breadth metric derived from the percentage of SP500 shares trading higher than their 50-day moving average. You can find this […]

Read full story · Comments are closed

A new monthly leading US index

Download article as PDF Many monthly leading indices published for the U.S have about 10 indicator components, and we wanted one that had at least double this. The components of the new index are all monthly time series and are as follows: 01.Labor Market Composite (19 indicators) 02.Housing Market Composite (6 indicators) 03.Enhanced Yield Curve […]

Read full story · Comments are closed

A U.S Weekly Leading Economic Index

Download article as PDF RecessionALERT.com has constructed a Weekly Leading Economic Index (WLEI) for the U.S Economy that draws from over 50  time-series from the following broad categories Corporate Bond Market Composite Treasury Bond Market Composite Stock Market Composite Labor Market Composite Credit Market Composite Being a weekly growth index, it provides data with at […]

Read full story · Comments are closed

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 are closed

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 are closed

RecessionALERT Valuation Index (RAVI)

Download article as PDF PART-1 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 […]

Read full story · Comments are closed

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 are closed

DeMark analysis for SP-500

Download article as PDF PREAMBLE A detailed 18-year analysis reveals that the DeMark Setup indicators are suitable for the detection of market tops and bottoms on the SP-500 Index. We have made some modifications to the original algorithms to achieve better performance and to this end, we feel we have something that is statistically significant […]

Read full story · Comments are closed

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 are closed

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 are closed

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 are closed

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 are closed

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 are closed

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 are closed