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-3.2-7-3-2020.png 7/10/2020: Latest update only available to Bronze members

7/3/2020: The Forward Rate Ratio between the 2-year and 10-year U.S. Treasury yields (FRR2-10) is above last week’s level.

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-6-12-2020.png 7/9/2020: Latest update only available to Bronze members

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iM-Weekly Unemployment Monitor

WCEM-Fig-1-5-29-2015 There is no improvement in the employment situation, hence no easing of the Covid-19 recession can be identified.

Please refer The iM-Weekly Unemployment Monitor

(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.-6-12-2020.png 7/10/2020: Latest update only available to Bronze members

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Market Signals Summary:

Both MAC-US and the 3-mo Hi-Lo Index have switched back into the market. The bond market model avoids high beta (long) bonds, and the yield curve is steepening. The Gold Coppock remains in gold but the iM-Gold Timer is in cash. The Silver Coppock model is invested in silver.

The BCI, the iM-LLI and the iM-Unemployment models all signal a recession warning.

The iM-GT Timer, based on Google Search Trends volume switched out of the markets on 3/5/2020.

Stock-markets:

Fig-2.-5-29-2015 The MAC-US model switched back into the markets..

 

(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.-6-5-2020.png 7/3/2020: To view latest update please log in

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The 6/5/2020 employment report claims 11.1% UER (last month 13.3%) and a total labor force 159,932,000 for mid-June 2020. However, the 7/2/2020 unemployment insurance report shows 31,491,627 persons claiming UI benefits week ending June 20.  Thus 31.5/159.9 = 19.7% (last month 18.9%) UER calculated from the unemployment insurance claims for exactly the same period.

 

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

    is there an update to the DAGS chart available somewhere?

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