How to Use iMarketSignals for Recession Signals

The four Recession Indicator models on iMarketSignals should provide early warnings of oncoming recessions. Historically, the prospect of an economic downturn (recession) has corresponded to declining stock prices. It is therefore prudent to reduce stock market allocations or exit the stock market prior to recessions.

Weekly Updates relevant to Recession Signals

(i) The Recession Indicator FRR2-10: This indicator is a long leading indicator, 14 month average before the recession starts, and the markets may still rise after this indicator falls below 1.0.

Fig-3.2-10-14-2016.png 10/21/2016: Latest update only available to Bronze members

10/14/2016: The Forward Rate Ratio between the 2-year and 10-year U.S. Treasury yields (FRR2-10) is below last week’s level and far away from signalling a recession.

A description of this indicator can be found here.

(ii) The Recession Indicators BCI :  On past performance, if BCIp falls below 25 a recession may begin about 20 weeks later, markets may have peaked or are about to peak. If BCIg falls below zero a recession followed historically on average 11 weeks later, markets have peaked.

BCI-9-29-2016.png 10/27/2016: Latest update only available to Bronze members

9/29/2016: The BCI at 211.6 is up from last week’s downward revised 210.9, and it is above its previous high for this Business Cycle as indicated by the BCIp at 100.  However, the 6-month smoothed annualized growth BCIg at 14.7 is down from last week’s downward revised  14.9.

No recession is signaled.

(iii) The Recession Indicators COMP : Similar to BCIg,  if this indicator falls below zero a recession starting a few weeks ahead is signaled by the model.

Fig-3.-9-23-2016.png 10/21/2016: Latest update only available to Bronze members

9/23/2016: Figure 3 shows the COMP above last week’s  level. No recession is indicated.    COMP can be used for stock market exit timing as discussed in this article The Use of Recession Indicators in Stock Market Timing.

(iv) The Unemployment Rate Recession Model:

The model signals the start of a recession when any one of the following three conditions occurs:

  1. The short exponential moving average (EMA) of the unemployment rate (UER) rises and crosses the long EMA to the upside, and the difference between the two EMAs is at least 0.07.
  2. The unemployment rate growth rate (UERg) rises above zero, while the long EMA of the unemployment rate has a positive slope, and the difference between the long EMA at that time and the long EMA 10 weeks before is greater than 0.025.
  3. The 19-week rate of change of the UER is greater than 8.0%, while simultaneously the long EMA of the UER has a positive slope and the difference between the long EMA at the time and the long EMA 10 weeks earlier is greater than 0.015.
Fig-8.-9-2-2016.png 10/7/2016: To view latest update please log in

9/2/2016: The unemployment rate recession model (article link), has been updated with the September UER of 5.0%. Based on the historic patterns of the unemployment rate indicators prior to recessions one can reasonably conclude that the U.S. economy is not likely to go into recession anytime soon. However, the growth rate UERg continues to rise (now at -4.0%) and EMA spread of the UER narrowing (now at -0.09), supporting the trend of  the long leading indicator DAGS.

Here is the link to the full update.


0 comments on “How to Use iMarketSignals for Recession Signals
  1. numejak says:

    Did i go blind today or did you take the FFR2-10 indicator off the imarketsignals main Most Recent Updates page? I can’t for the life of me find it today.

  2. numejak says:

    “We are moving FRR2-10 to monthly updates next week.”

    Could you point me in the direction of the new monthly FRR2-10 please? I still cannot find it. Thanks!

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