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Macro Monday 60 ~ Japanese Yen Recession Signal Macro Monday 60 Japanese Yen Recession Signal If you follow me on Trading view, you can revisit this chart at any time and press play to get the up to date data and see if we have hit any Yen recessionary trigger levels. Very handy to have at a glance. The Chart The chart illustrates how the Japanese Yen / U.S. Dollar has followed a similar trajectory as the U.S. Unemployment Rate. The chart demonstrates that the Yen price has behaved in a particular way prior to recessions (red areas). You might be wondering how the Yen can offer insights into economic recessions and how they are linked; 1. Historically, the yen has strengthened during recessions due to the reduction of U.S. interest rates that typically coincides with recessions. When the U.S. Federal Reserve lowers rates, it makes the yen relatively more attractive to investors. With rate cuts highly likely in September 2024 the Japanese Yen is likely to see positive price action against the U.S. dollar. 2. The BOJ has historically intervened to prevent the Yen from becoming too strong. A strong yen negatively impacts Japan’s export-reliant economy. However, this trend shifted in 2022 when Tokyo stepped in to defend the Yen’s value. The BOJ bought Yen after expectations that other central banks would raise rates while the BOJ kept rates ultra-low. 3. In July 2024, the BOJ raised interest rates and signaled further policy tightening. Concerns about the historically weak yen also played a role (evident on the chart by the 30 year low in June 2024). This move, along with U.S. growth concerns, triggered an unwinding of carry trades (where investors borrow cheaply in yen to invest in higher-yielding assets), causing the yen to rebound against the dollar. The chart along with the above three points are suggesting the Yen may be about to rise significantly in coming months versus USD. This direction of price for the Yen is consistent with the early signs of recession onset, in particular if the Yen increases in value by 22% to 42% (see below). Japanese Yen vs U.S. Unemployment Rate The blue numbers and corresponding blue box on the chart suggests that a sudden 22% – 42% increase in the Japanese Yen / U.S. Dollar (from below the 0.008200 level) typically precedes recessions. This 22 – 42% increase in the yen is something we can look out for in combination with other recession charts we have in our current armory. See my most recent charts. ▫️ Above we discussed some macro-economic factors that suggest a high probability of the Yen ascending higher. The yen price also made a 30 year low in June 2024 and now appears to be breaking higher. ▫️ We now have levels on the chart to watch; the 22% level and the 42% level. In the event the Yen rises to these levels alongside the U.S. Unemployment Rate continuing to increase, this would significantly raise the probability of recession in subsequent months. Summary ▫️ The chart captures how the Japanese Yen has followed a similar trajectory as the U.S. Unemployment Rate. When both move in unison up and to the right it typically isn’t a good sign for the economy. ▫️ A number of macro-economic factors suggest the Yen is about to increase e.g. Likely lowering of interest rates in the U.S will make the dollar more affordable to borrow and increase its supply weakening its strength whilst increasing the strength/value of the Yen. ▫️ The chart demonstrates that increases in Yen from below 0.008200 by 22% - 42% typically precede recessions. Theses levels are etched on the chart for you to monitor. ▫️ As the Yen price made a 30 year low in June 2024 and now appears to be breaking higher and with the addition of macro-economic events suggest a higher Yen, its now more important than ever to monitor the Yen and its historic recession trigger levels at 22% and 42%. These are on the chart for your convenience. You can revisit this chart at any time and press play to get the up to date data and see if we have hit any JPY recessionary trigger levels. Japan Trade Opportunities Given the higher probability that the Yen is increasing, this heightens the probability of recession, however it also means some Japanese stocks might offer a nice back end currency benefit over coming two years. Do you know any good Japanese Value stocks? If you do, be sure to share them below for some recession proof, back end currency promising trades. As always, its been a pleasure PUKA
Long
by PukaCharts
Macro Monday 58 - Recession Warning Charts Worth Watching Macro Monday 58 Recession Charts Worth Watching If you follow me on Trading view, you can revisit these charts at any time and press play to get the up to date data and see if we have hit any recessionary trigger levels. They are very handy to have at a glance. CHART 1 10 - 2 year treasury yield spread vs U.S. Unemployment Rate Subject chart above Summary ▫️ The chart demonstrates how the inversion of the Yield Curve (a fall below 0 for the blue area) coincides with U.S. Unemployment Rate bottoming (green area) prior to recession onset (red areas). ▫️ The yellow box on the chart gives us timelines on how many months passed, historically, before a confirmed economic recession after the yield curves first definitive turn back up towards the 0% level (also see circled numbers showing connecting bottoming unemployment rate). ▫️ Using this approach, you can see that the average time frame prior to recession onset is 13 months (April 2024) and the max timeframe is 22 months (Jan 2025). ▫️ This is only a consideration based on historical data and does not guarantee a recession or a recession timeline however it significantly raises the probability of a recession, and the longer into the timeframe we are the higher that recession probability. ▫️ We typically we have a recession (red zones) either during or immediately after the yield curve moves back above the zero level. At present we are at -0.08 and fast approaching the zero level which is one of the most concerning data points of this week. ▫️ The unemployment rate moved from a low of 3.4 in April 2023 to 4.3 in July 2024. This is a significant increase and is typical prior to recession onset. Conclusion ▫️ If both the 10 - 2 year treasury yield spread and the U.S. Unemployment Rate continue in their upwards trajectory in coming weeks and months, this is a significant risk off signal and recession imminent warning. ▫️ The Sahm Rule triggered this week which has been one of the most accurate indicators of a recession starting. It is triggered when the three-month moving average of the U.S Unemployment Rate above rises by 0.50 percentage points or more, relative to its low over the previous 12 months. The Sahm rule triggering adds to recession concerns, however the designer of the rule has stated that I may not be accurate factoring in recent events like COVID-19 which has thrown unemployment and economic data to extremes. What is the 10-2 year Treasury yield spread? The 10-2 year Treasury yield spread represents the difference between the yield on 10-year U.S. Treasury bonds and 2-year U.S. Treasury bonds. It’s calculated by subtracting the 2-year yield from the 10-year yield. When this spread turns negative (inverts), it’s significant because it often precedes economic downturns. An inversion suggests that investors expect lower future interest rates, which can signal concerns about economic growth and potential recession. In essence, it’s a barometer of market sentiment and interest rate expectations What is the U.S. Unemployment Rate The unemployment rate is calculated by dividing the number of unemployed people by the total labor force in the U.S (which includes both employed and unemployed individuals). CHART 2 Interest Rate Historic Timelines and impact on S&P500 Summary ▫️ This chart aims to illustrate the relationship between the Federal Reserve’s Interest rate hike policy and the S&P500’s price movements. ▫️ This is obviously pertinent factoring in the expectations of a rate cut in Sept 2024. This chart which I shared in Sept 2023 may have accurately predicted this likely Sept 2023 interest rate cut but is this positive for the market? ▫️ Interest Rate increases have resulted in positive S&P500 price action ▫️ Interest rate pauses are the first cautionary signal of potential negative S&P500 price action however 2 out of 3 pauses have resulted in positive price action. The higher the rate the higher the chance of a market decline during the pause period. ▫️ Interest rate pauses have ranged from 6 to 16 months (avg. of 11 months). ▫️ Interest rate reductions have been the major, often advanced warning signal for significant and continued market decline (red circles on chart) ▫️ Interest rates can decrease for 2 to 6 months before the market eventually capitulates. ▫️ In 2020 rates decreased for 6 months as the market continued its ascent and in 2007 rates decreased for 2 months as the market continued its ascent. This tells us that rates can go down as prices go up but that it rarely lasts with any gains completely wiped out within months. Conclusion: ▫️ Rate cuts should signal significant concern as most are followed immediately by recession or followed by a recession within 2 to 6 months of the initial cut. This is high risk territory. ▫️ During the week I seen the 2 year treasury bill which matches closely the Federal Reserve interest rate cycle. The spread developing between the two suggests rate cuts are imminent. Remember point one above. The chart below: CHART 3 Relationship between 2 Year Bonds and Interest Rate ▫️ Very briefly, you can see the red areas where gaps formed when the Federal Reserve interest rate was lagging behind the 2 year treasury bonds declines. ▫️ Currently there is a large gap of 1.74% between the two data sets. The last time we had gaps like this were prior to the 2000 and 2007 recessions. Even prior to COVID-19 you can see the Federal reserve was playing catch up. What to watch for in coming weeks and months? ▫️ If both the 10 - 2 year treasury yield spread and the U.S. Unemployment Rate continue in their upwards trajectory in coming weeks and months, this is a significant risk off signal and recession imminent warning. ▫️ Since 1999 the Federal reserve interest pauses have averaged at 11 months. July 2024 is the 11th month. This suggests rate cuts are imminent. ▫️ The 2 year bond yield which provides a lead on interest rate direction is suggesting that rates are set to decline in the immediate future and that the Fed might lagging in their rate cuts. Furthermore, rate cuts are anticipated in Sept 2024 by market participant's. ▫️ Finally, rate cuts should signal significant concern as most are followed immediately by recession or followed by a recession within 2 to 6 months of the initial cut. Yet the market appears to be calling out for this. This is high risk territory. Combine this with a treasury yield curve rising above the 0 level and an increasing U.S. unemployment rate and things look increasingly concerning. We can keep any eye on these charts for a lead on what might happen next. I will be reviewing some other charts over coming days around jobless claims and ISM figures to see how positive and negative we are looking. PUKA
FRED:T10Y2Y
by PukaCharts
4
Macro Monday 14~Unemployment Rate Rise Macro Monday 14 US Employment Rate Pre-Recession Indications The Unemployment Rate tells us how many people in the United States are currently without a job and actively looking for one. The U.S. Bureau of Labor Statistics calculates and reports the unemployment rate. In basic terms it consists of the following; Survey: The Bureau of Labor Statistics conducts a regular survey of a sample of households across the country. They ask people whether they are working or actively trying to find work. Calculation: Based on the survey results, the Bureau calculates the percentage of people who are unemployed (those without jobs but actively seeking employment) compared to the total number of people in the labor force (those who are either employed or actively looking for work). Reporting: This percentage is then reported as the unemployment rate. For example, if 5 out of every 100 people in the labor force are unemployed, the unemployment rate would be 5%. At present the Unemployment rate is 3.8%. In simple terms, the unemployment rate is a way to gauge how many people are struggling to find jobs in the United States. In this respect it is an important economic indicator that helps us and policy makers understand the health of the job market. The Chart In today’s chart I will be analysing the history of the Unemployment Rate and how it has behaved both before and during recessions. The aim of the analysis is to help us understand the distinct pre-recession patterns and levels that occur prior to recession so that we can prepare ourselves should these levels be breached or these patterns play out again. These historic levels will be placed on the chart for you to monitor from today forward. Chart Outline: 1. Recessions are the red zones (also numbered & labelled 1 – 12 and on the chart itself) 2. Increases in the Unemployment Rate prior to recession are in blue. - These blue zones start at the lowest level the Unemployment Rate established prior to the recession periods in red. - Basis points (bps) have been used to show the change in the value within the blue zones (pre-recession zones) e.g. recession No. 2 The Great Financial Crisis had a pre-recession Unemployment Rate increase from 4.39% - 5.00% which is a 0.61% increase in the unemployment rate or a 61 bps increase. - Peaks: I have also included peak bps increases within these pre-recession periods (within the blue zones). These are times that the Unemployment Rate peaked higher but reduced thereafter but a recession still followed. Chart Findings: 1. In 10 out of 12 of the recessions outlined the Unemployment Rate increased in advance of the on-coming recession (in the blue zones) demonstrating that initial early increases to the Unemployment Rate can act as an early recession warning signal: - An average increase of 33.5 bps over an average timeframe of 7.3 months is observed pre-recession. - The maximum increase in the pre-recession blue zones was 71bps over 8 months. This max increase was observed prior to 1980 Volcker/Energy Recession no. 6 on the chart (this increase was from 5.59% to 6.30% in the Unemployment Rate itself – a 71bps increase). This recession was induced by Fed Chair Paul Volcker’s sudden increase to interest rates much like those that have been imposed by Jerome Powell over recent months (Volcker was appointed in Aug 1979 and got to work quick). - The max timeframe for a rising Unemployment Rate prior to recession was 16 months. This was prior to the The Gulf War Recession, no. 4 on the chart (which was considered a short 8 month softer recession). This max 16 month pre-recession timeframe has been marked on the chart to May 2024 in correspondence with today’s pre-recession blue zone timeline – so we know where a max timeline would put us (not a prediction). - 2 out of 12 times the Unemployment Rate did not increase prior to recession however it did not decrease either, it based at 0 bps or no change (No.1 COVID-19 Crash and No. 5 The Iran/Energy Crisis Recession). Whilst the Unemployment Rate did not increase, they did temporarily peak higher within the blue zones by 10 bps (No. 1) and 31 bps (No.5) demonstrating the importance of peaks and bases formed prior to an Unemployment rate ramp up and recession. I found the peak increases interesting to include because they illustrate that the Unemployment Rate can oscillate peaking higher temporarily only to form a higher low or return to its starting point, but a peak, if significant enough could be a telling indicator. The most notable peaks are the following; 62 bps (no. 12), 61 bps (no. 9), 60 bps (no. 10), 30 bps (No. 8), 31bps (No. 5) and only 10 bps (No. 2) for the COVID Crash. All of these peaks reduced thereafter within their pre-recession blue zones but a recession still ensued. A sudden increase in the unemployment rate should be taken seriously. I will include a subsequent data table chart that outlines these peaks and all other data utilized for Chart 1’s illustration and findings. We are currently in dangerous territory as we have passed the average timeframe of 7.3 months of increases to the Unemployment Rate and the Unemployment Rate increased by 40 bps over that period which is higher than the historical average of 33.5bps. We have surpassed both averages. The max historical pre-recession increase is 71 bps (No. 6) so this is a level to watch going forward. This translates to a level of 4.11% in the Unemployment Rate (marked on the chart). Similar to today’s Unemployment Rate level, there are two very similar instances in the past where the Unemployment Rate increased from c.3.4% to c.3.8% prior to recession (See RED ARROWS on chart). These both took 7 – 10 months to play out with a 10 – 42 bps increase to be established before recession hit. This is very similar to today’s levels which are at 7 months and 40bps of an increase with the 8th month being released this Friday 6th October 2023 which should be very revealing. We are now well armed with an historical chart as a reference point for any upcoming Unemployment Rate figures released in coming months. We know we have surpassed the averages in terms of timeframe (7 months) and the 40 bps increase is above the avg. 33.5 bps. We can refer back to this chart using Trading View, press play and see if we are breaching the max pre-recession level of 4.11% (the 71bps move) or other extreme pre-recession levels such as the dot.com and GFC Unemployment Rates (both marked on the chart). And if you don’t frequent the chart on trading view I will update you here regardless. Lets see what Friday brings…. PUKA
FRED:UNRATE
by PukaCharts
1
The Case for UnemploymentUnemployment is tricky. You just cannot announce high unemployment. The political damage is too much to take. But unfortunately, the time comes when unemployment just increases... Every sane person would want the economy to remain calm for as long as possible. This is not sinister or bad. After all, it is in the duty of Governments and Central Banks to keep our daily lives as calm and peaceful as possible. Bad unemployment data is inherently bad. It is worse than bad inflation data. So it is always a tricky situation... After the inflation chaos, calm has return to the financial world. Volatility and inflation is lower, equities are higher! So all is well! Not only inflation is lower, but also unemployment! With an ultra-low rate of 3.4%. News just couldn't be better! Initial claims is also breaking down, signaling better days ahead... After all, low unemployment is good! Right? Not so fast fella! Low unemployment is good for, well, employees! But it is bad for corporations! Finding skilled personnel is incredibly hard. So much so, that most companies underperform. They just can't grow! I believe that unemployment does not necessarily break the economy. And the economy does not necessarily break the unemployment. It is a mixed bag... Sometimes, businesses benefit from high unemployment. If the antagonists fail, others get their workers, and most importantly, the piece of the pie! Some companies grow while others fail... Believe it or not, low unemployment is risky. Especially when it is in a 54 year low... It just cannot go lower! Recent unemployment data is perfect. However, Continuous Jobless Claims (USCJC) may give us a new perspective... It is at times like these when we see conflicting data. Continuous Claims increase while unemployment rate is decreasing. At that period, the official unemployment rate was making lower lows! This is deeply concerning. Especially when it is eerily similar to 2020. Perhaps it is a shift of balance right before a crisis. Perhaps a period when long-term employees lose their jobs since companies attempt to cut down costs. Instead, they hire less skilled workers with lower wages, perhaps for part-time jobs. This may be the last attempt of companies to stay afloat. It is also the last attempt for families to stay afloat. High food prices necessitate work at all costs, no matter how low... A crisis may be brewing... A Black Swan one, just like 2020. The Big Tech bubble is literally hollow, full of derivatives aka weapons of mass destruction. And the scale and the ramifications of such a crisis are still unknown. (By inflation pressure I mean the amount of work the FED does to fight inflation. While this chart increases, inflation gets out of hand) Perhaps all of this is meaningless. Only time will tell what will happen... WW3 commence I guess? Tread lightly, for this is hallowed ground. -Father Grigori
ECONOMICS:USCJC
by akikostas
3
The Fed's Pivot - What to Expect in the Months Ahead In this video, I explain what to expect in the months ahead, following the Fed's pivot back to monetary easing. Also, I wanted to make several notes: When I said that it's almost never better to own derivatives than holding an asset outright, I do realize the importance that derivatives can play with leverage and risk management. When I said that fear is always highest at the +2 standard deviation of the log-linear regression channel, this was confusing because typically fear is highest when price reaches the -2 standard deviation. In this particular ratio chart, fear over the Grayscale Bitcoin Trust was highest when Bitcoin outperformed it enough for the BTC/GBTC ratio to reach the +2 standard deviation. When I said that the log-linear regression channel is one of the best indicators, I do realize that compared to other statistical methods, this indicator is quite rudimentary. Nonetheless, I find it to be quite useful. I apologize for the poor audio, this seems to be a matter of how TradingView is uploading my audio. On my end, my audio is very clear. Important Disclaimer Nothing in this post should be considered financial advice. Trading and investing always involve risks and one should carefully review all such risks before making a trade or investment decision. Do not buy or sell any security based on anything in this post. Please consult with a financial advisor before making any financial decisions. This post is for educational purposes only.
FRED:WALCL
by SpyMasterTrades
38
S&P 500 (SPX)/Producer Price Index (PPIACO) Leading Market LowerToday, I wanted to share a chart setup that was inspired by @Badcharts that highlights the ratio of S&P 500 (SPX) / Producer Price Index (PPIACO) correlatio n — which, as @Badcharts recently highlighted on a Twitter space led (or very closely correlated) with the downturn in the S&P 500 (SPX SPY ES1!) starting in late 21’. In addition to this, I wanted to layer on the S&P 500 (SPX), Unemployment Rate (UNRATE), & U.S. Recessions as these (3) inputs seem to have a very intersting correlation to the relative predictive timing of previous recessionary periods — both in 01’ & 08’. I’ve also added the “MACD Indicator” (bottom indicator) & the “Distance from Moving Average” (first indicator), using the SMA 144 & 200 Bar Lookback as these help highlight overbought/oversold conditions in the ratio of S&P 500 (SPX) / Producer Price Index (PPIACO) — which could help you identify tactical market positioning opportunities (long or short). Here is the chart key for this setup: 📊🔑 Black/White Bars = S&P 500 (SPX) / Producer Price Index (PPIACO) Blue Line = SPX (SPY ES1!) Orange Line = Unemployment (UNRATE) Vertical Black Dotted Line = Pre-Recession Ratio Peak (SPX/PPIACO) Vertical Orange Dotted Line = Pre-Recession Unemployment Trough (UNRATE) Vertical Blue Dotted Line = Pre-Recession S&P 500 Peak (SPX) 1990 - 2023 Overview (Monthly) 📊 *2001 Recession* (Monthly & Weekly) 📊 *NOTE: First indicator peak/trough to last indicator peak/trough = 5 bars (months)* Peak (SPX/PPIACO) = Mar. 00’ Trough (UNRATE) = Apr. 00’ Peak (SPX) = Aug. 00’ *2008 Recession* (Weekly & Daily) 📊 *NOTE: First indicator peak/trough to last indicator peak/trough = 5 bars (months)* Trough (UNRATE) = May 07’ Peak (SPX/PPIACO) = June 07’ Peak (SPX) = Oct. 07’ 2023 Recession? (Weekly & Daily) 📊 *NOTE: First indicator peak/trough to last indicator peak/trough = 7 bars (months), but no “technical recession”…* Peak (SPX) = Dec. 21’ Peak (SPX/PPIACO) = Jan. 00’ Trough (UNRATE) = July 22’ What are your initial thoughts & observations from this chart setup? Let me know in the comments below! 👇🏼
SP:SPXShort
by kylemusserco
1
Leading Indicators - PPI (PPIACO) vs. Unemployment (UNRATE) I wanted to highlight how the peak (downward move) in the Producer Price Index (PPIACO) typically corresponds with the trough (upward move) in the Unemployment Rate (UNRATE) (inverse correlation), as a period of Recession takes hold on the economy, & the financial markets. I also wanted to compare the above correlation with cycle tops in WTI Crude Oil (WTISPLC) , & also with respect to the OECD Leading Indicators (USALOLITONOSTSAM) — as this helps to pinpoint some of the historic baseline(s) for predicting the peak &/or trough in the business vs. market (financial) cycles. Here is the key for the attached chart(s): Top Chart Black Line (Unemployment Rate - UNRATE): *Black Vertical Dotted Line* = Recession Timing Trough Blue Line (Producer Price Index - PPIACO): *Blue Vertical Dotted Line* = Recession Timing Peak Orange Line (WTI Spot Crude - WTISPLC): *Orange Vertical Dotted Line* = Recession Timing Peak Red Shaded Areas (Recession): Indicator via @chrism665 Bottom Chart OECD Leading Indicators (USALOLITONOSTSAM): *Black Dashed Line* = Pre-Recession Indicator Peak Green Horizontal Dotted Line = Expansion Baseline (100) Orange Horizontal Dotted Line = Current Reading (98.62) Red Horizontal Dotted Line = Danger Zone (<97) Red Shaded Areas (Recession): Indicator via @chrism665 Looking at the larger picture of both charts, you can see that typically in previous periods of Recession you would see this flow of the signals (first to peak/trough, last to peak/trough): Peak - OECD Leading Indicators (USALOLITONOSTSAM) Trough - Unemployment Rate (UNRATE) *Peak - Producer Price Index (PPIACO)* *Peak - WTI Spot Crude (WTISPLC)* *Note* - As you can see PPIACO & WTISPLC are very closely correlated as demand peaks out, you then see a shift downward in WTISPLC as this is a signal of the topping of economic growth. Now let's dive close-up into each time period of recession, as we can see some linkages/similarities in the 1991, 2001, & 2009 recessions vs. the what is (likely) a 23' recession, depending how the economic , markets , & financial data plays out this upcoming year — potentially into 24'. 1991 Recession Timeline Peak - OECD Leading Indicators (USALOLITONOSTSAM): July 1987 Trough - Unemployment Rate (UNRATE): Mar. 1989 Peak - Producer Price Index (PPIACO): Oct. 1990 Peak - WTI Spot Crude (WTISPLC): Nov. 1990 2001 Recession Timeline Peak - OECD Leading Indicators (USALOLITONOSTSAM): Jan. 2000 Trough - Unemployment Rate (UNRATE): Apr. 2000 Peak - WTI Spot Crude (WTISPLC): Nov. 2000 Peak - Producer Price Index (PPIACO): Jan. 2001 2009 Recession Timeline Trough - Unemployment Rate (UNRATE): May 2007 Peak - OECD Leading Indicators (USALOLITONOSTSAM): June 2007 Peak - WTI Spot Crude (WTISPLC): June 2008 Peak - Producer Price Index (PPIACO): July 2008 2023(24) Recession Estimated? Peak - OECD Leading Indicators (USALOLITONOSTSAM): May 2021 Peak - Producer Price Index (PPIACO): June 2022 Peak - WTI Spot Crude (WTISPLC): June 2022 Trough - Unemployment Rate (UNRATE): Sept. 2022 What do you think about this macro analysis? Have we potentially been in a recession in 22' — or are we moving closer to higher unemployment (UNRATE) in 23' as the macro/market conditions worsen, & the Federal Reserve's tighter monetary conditions (liquidity & credit) take their toll on the economy? Let me know what you think in the comments below! 👇🏼
FRED:UNRATEShort
by kylemusserco
UNEMPLOYMENT RATE vs SPXSo as you see - what comes down, must go up - UNEMPLOYMENT RATE is at record lows right now and when it did that - after some consolidation - it sttarted to grow - each time this happened, SPX entered a bear market. Calculating the amount of days since the breakout of the UNRATE trend - it is a range of ~ 100 to 400 days before starting the decline on SPX - right now it looks like UNRATE has broken the trend for more than 300 days already. So the decline isn't far. We haven't seen the worst yet.
FRED:UNRATE
by TheSecretsOfTrading
UNRATE - Dangerous low levelsLow levels of unemployment normally mean that the economy is at its best and that all companies are fully hired and investors have been investing a lot to grow businesses. The danger is overinvesting and a very competitive environment which backslash in this euporic low levels of unemployment. These are well correlated to economies topping as the tipping point only means to fire people and turn into a downward trend again. Additionally the negative rates from the European Central Bank have sparked a lot of debate and there is no more further room for quantative easing if a economic collapse occurs. A recipe for distaster if you ask me, we will see it come around and most of the time act too late. There is no escape from it.
FRED:UNRATE
by TheTrex
12
Time to sell based off initial unemployment claimsThis primary indicator just flashed a huge warning signal. Looking like its time to sell and take profits on the enormous post GFC rally. Note - keep a close watch on weekly claims in the coming weeks. We still want a little bit more confirmation of this rising before jumping to conclusions about the direction of unemployment, but I do not take this cross lightly. Other Quick Notes... For this signal, there ARE some false positives, most notably around 1995. 1990's signal got the recession right on the dot, but the recession was mild and it wasn't necessarily a great signal on buying or shorting the markets directly. To get a better read on false positives combine this signal with others - look at it only post yield curve inversion. That alone will eliminate the few false positives. Keep an eye on other unemployment data series that are faster moving and not quite as subject to revisions. Challenger job cuts, ISM employment index, and a few others can help corroborate the story here. Other big jumps that were temporary false positives (see 2017 or 2005) typically occur due to things like hurricanes coming through. With that said, these were obvious temporary distortions, and not representative of permanent changes in the labor market.
FRED:ICSAShort
by GTStockmaster
Next U.S. Recession is further out A lot of people are thinking the recession and crash in the equities markets will start this year. I beg to differ. Gold is in accumulation and so is bitcoin. I think both assets will rally up to their previous highs within the next two years and when the market crashes in 2022-23 that is when gold and bitcoin will dump around 40-50% with equities. There is another support for unemployment suggesting a possible crash at the end of 2020. Equities are extremely over valued but the market is completely irrational and I believe will go higher than most expect.
FRED:UNRATELong
by mattgetsbarreled
2
Initial Claims vs. SPX - Close to a CrossCross = very negative, and typically occurs during a fed rate cutting cycle. These often top-tick markets, and this has been a very reliable indicator across all the bull and bear markets for quite some time. Note - I use ICSA because despite it being noisy, it's actually a cleaner data series when you just smooth it with a moving average (I use EMA). It's not subject to as much potential bias or data issues as some of the other unemployment metrics are.
FRED:ICSA
by GTStockmaster
1
Initial Claims UpdateToday's read (not accounted for in this chart) is starting to make this a bit worrying. ICSA rising again week over week, threatening to break momentum. ICSA is a noisy indicator, but if you simply add smoothing with a moving average calculation, it becomes a better version of the unemployment rate. I say it's better because it's not subject to data issues such as workforce participation rate or other such issues that may skew the data a bit. Beyond that, ICSA leads the unrate from a data perspective, so it's a bit more of an advanced indicator. For this indicator, I like to use the 52 week (1 year) EMA and the 26 week (1/2 year) EMA to smooth things out. This HAS crossed in the past 10 years temporarily during some big unemployment swings from hurricanes. So it's important to understand those as just temporary false signals, and not anything real going on with the economy. Right now however, we clearly have no hurricanes going on, and we're getting very close to a cross, which is a pretty damn good sell signal.
FRED:ICSA
by GTStockmaster
Initial Claims updateNo MA cross included here, just an update on current Initial claims direction. We're still ticking upward more, haven't yet received confirmation, but starting to look like we'll get some momentum in the unemployment rate. Once that gets going, it's game over for the economy. We're getting more and more updates of corporate layoffs recently, but wait on data to confirm. FWIW, initial claims is a great series to watch, and is better than the straight unemployment rate because it's... Higher frequency Not affected by the volume of people out of the workforce Not affected by average hourly work week differences from month to month
FRED:ICSAShort
by GTStockmaster
Unemployment / Initial claims momentum for recession watchingUnemployment data is clearly one of if not the most important data sets when it comes to predicting a recession. With unemployment at very long term lows, when does this break, and what happens when it does? For me, I watch exponential moving average crossovers in unemployment data. Initial claims works if you smooth it out (it's a high frequency data series). The key takeaway with unemployment is that it tends to trend strongly. Once a direction is established, it will usually keep heading in that direction. Right now, the shorter-term moving average here is curling upward rather fast as we've heard about a series of big layoffs (GM) and potential weakness in the economy. Is this the start of something bigger? We'll have to wait and see of course, I watch for a cross and then sustained upward movement. When an economy gets tight due to inflation, higher interest rates, higher wage costs, and lower demand for big ticket items (as seen in autos, homes, etc) companies eventually are forced to lay people off. As you can probably see, this easily becomes a feedback loop in the economy. When laying off people reaches a high enough point, that affects the demand portion of the consumer economy, which then starts to affect companies bottom and top lines. This then forces more layoffs, defaulting in the credit cycle, etc etc. Basically, once unemployment picks up momentum, it almost always leads to a recession.
FRED:ICSA
by GTStockmaster