Economic Indicators Roundup (April 15, 2014)

Economic indicators are everywhere, so this is kind of like a dashboard that I like to follow.  For each indicator, I will try to give you a brief description, the latest reading and what I understand to be its implications.  For simplicity, I will assign each a rating of positive, neutral or negative.  For the economic indicators, I will denote in each one’s section how I decide which rating to give it.  At the end, I assign an overall rating, but this is just to guide me in my takeaway of where things stand.  It’s not scientifically rigorous or anything.

  • Positive - indicative of a healthy, growing economy.
  • Neutral - indicative of a slow or no growth economy but not a contracting (recession) economy.
  • Negative - indicative of a shrinking economy or recession.

(NOTE: For a “Quick ‘n Easy” read, just review the labeled white boxes, then skip to my “Easy Take” summary at the end.  You can review any charts/graphs afterward.  I want to make sure no one is intimidated by the length of my posts, even though I’m trying to making them easy …)


Quick Summary

Indicator (Click for details – only works if full article is open) Current Rating (change from previous roundup)
ADS Business Conditions Index Positive
Bloomberg Financial Conditions Index Positive
Daily Consumer Leading Indicators Negative
Citigroup Economic Surprise Index Negative
Employment Trends Index Positive
Chicago Fed National Activity Index Neutral
Easynomics Real Estate Price Stability Index Positive
Easy Trends Dashboard   (min/max -3 to +3) +2.56 = Definitely moving in a positive direction, with very few unconfirmed trends or off-trend readings

NOTE: You may be reading an outdated analysis.  Please visit my latest economic indicators roundup.



Economic Indicator: ADS Business Conditions Index   |   POSITIVE
Easy Intro to ADS Business Conditions Index   |   Link to Source   |   Latest Date This Info Represents: April 5, 2014

Quick ‘n Easy

A combination of several key indicators of business conditions suggests, with high confidence, that at the end of December 2013 (most recent date for which there is data for all components of the index), conditions were below average (-0.486).  As of about a week and a half ago, it suggested, with low confidence, that current conditions were slightly above average (+0.143), historically speaking.  The index suggests that economic activity took a temporary dive in late 2013 before bouncing back quickly to levels that are slightly above historical averages.

Economic Indicators - ADS Business Conditions Index April 5 2014

Source: PhiladelphiaFed.org

Easy Description: Combines several indicators together to describe current business conditions.  A value above zero means that conditions are better than average, but below zero means worse than average.

Latest Readings:

April 5, 2014: Positive (+) 0.143 (includes weekly unemployment figures and maybe one other indicator)

One month prior: Positive (+) 0.109
One quarter prior: Negative (-) 0.521

The most recent date for which there is data for all components of the index is end of December 2013, when conditions were below average (-0.486).

Implications: It looks like conditions took a hit after reaching an interim high in mid-November 2013.  Fortunately, we never went into a recession-type shrinking phase, and preliminary data suggest that conditions quickly bounced back up to above average levels since mid-February.

Additional Info: This index provides confident readings about the past when all of the indicators have been collected (everything to the left of the left-most vertical line).  The readings in between the two vertical lines are somewhat less confident because they include some, but not all, of the indicators.  And the latest reading always falls to the right of the right-most vertical line and includes only a couple of indicators.

Easynomics Rating Methodology: For this index, I will use the very latest reading and rate anything between zero and minus (-) 1.00 as “neutral” – anything above or below that will be rated “positive” or “negative” respectively.

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Stock Market Forecast Update

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EASY NOTE: I offer email newsletters documenting portfolio simulations that apply a concept with solid backtesting and intuitively sound principles.  Click here to learn more about the newsletters or sign up to receive them.  If they’re not outperforming the S&P 500 … they’re free!

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I have updated my Stock Market Forecast page with the latest systems I’m testing.  You can read the explanation there in detail.  The quick summary is that I’m doing two primary models (4-week and 13-week), both using a linear regression model (a statistical way of finding a straight-line relationship between a set of variables and a calculated outcome) that involves four different technical analysis data points.

I graph the stock market forecast for each model over the coming 4-week or 13-week period.

Lastly, I will issue two weighted combination forecasts each week in my update post, each of which makes only one “official” forecast for the record book.  One represents a weighted average between where the two models think the S&P 500 will close this upcoming week.  The weights are based on how well each model explains the ups and downs of the S&P 500 – that is, using the “r-squared” for the regression analysis.  The other is a “Headline Adjusted” model, which tries to account for the fact that extreme and unforeseen events can throw off the models.  So, I remove data that seems affected by such effects and keep the more pure data.  This model will also make only one forecast, one week in advance.

Performance of Last Week’s Forecast

Weekly Direction of the S&P 500

Correct:   4-week   /   Headline-Adjusted

Incorrect:   13-week   /   Weight-Adjusted Combo

 

Accuracy of the Weight-Adjusted Combination Models

Regular Weight-Adjusted Combination: 2.78 percent too optimistic

Headline-Adjusted Combination: 2.21 percent too optimistic

 

Accuracy of Individual Models

4-week Model:  2.71 percent too optimistic

Correct Prediction of S&P 500 Direction thru Last Week’s Close:  2 out of 4 predictions

Notes: All four times it made a forecast, it was too optimistic (by 2.68 to 2.71 percent). It got the direction from that point through the forecast date correct on 2 of its 4 attempts.

 

13-week Model:  2.80 percent too optimistic

Correct Prediction of S&P 500 Direction thru Last Week’s Close:  4 out of 13 predictions

Notes: The model started out about 2.7 percent too optimistic and slightly worsened to finish about 2.8 percent too optimistic.  It got the direction wrong on 7 of its final 8 attempts.

 

Estimated Effect of Headlines on Current Market Value

NOTE: This is based on a calculation I do after running the current week’s headline-adjusted forecasts.

4-week Model: Negative effect of  2.2 percent   (down 0.5 percent from last week)

13-week Model: Negative effect of 2.9 percent   (down 2.6 percent from last week)

Notes: The headline effect went down an average of 1.55 percent from last week, so headlines are artificially holding down the market right now by about 2.55 percent (equally-weighted average of the two models).  Note: This may not be the same as the difference between the “weighted combo” and “headline-adjusted” forecasts because those forecasts are weighted according to the accuracy of each model.

 

Stock Market Forecast Summary for Upcoming Week

Here’s the breakdown:

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Stock Market Technical Analysis – Tech It Easy (thru April 11, 2014)

Stock market technical analysis is all you need to know, complete hogwash or somewhere in between.  It depends on who you ask.  If you find it interesting, you’ll probably like reading this weekly feature.

NOTE: You may be reading an outdated article.  Please visit my latest stock market technical analysis summary of the S&P 500 for more.

This is my standard intro to stock market technical analysis – you can skip down to the table (or click “continue reading”) if you read this feature regularly:

Many people who trade in the markets believe that there are patterns that can generally lead to profitable trades.  By analyzing stock charts that show the change in price along with the volume (how many shares were traded), “technical analysts” believe they have an edge and can time their trades profitably.  There is significant controversy over this subject, however.  Others say that, unless you have some information that no one else does, basically you can never beat “the market” because everything is already baked into the current price of a stock.

Nevertheless, supporters of stock market technical analysis are everywhere, and the tools for their trade can be found throughout bookstores and the Internet.  I like to follow some websites that do some of the work automatically and provide a snapshot opinion of whether a particular stock is considered “bullish” (going to go up in price), “bearish” (going to go down in price) or “neutral” (stay about the same price).

For simplicity, I’d like to start by showing you a snapshot of what several stock market technical analysis websites suggest about the exchange traded fund (ETF) with the ticker symbol of SPY.  This fund is supposed to go up and down the same as the S&P 500 index does.  And many people consider the S&P 500 index (a measure of the price of the 500 largest companies that trade in the U.S.) to be an accurate gauge of where “the market” stands.

For each of the sources below, where I have a choice, I will use a measure that attempts to predict the future direction of SPY or S&P 500 in the next 3 months.

S&P 500 Technical Analysis Summary

Source: Barchart.com   |   NEUTRAL

Quick ‘n Easy

Barchart.com uses three analyses to predict the direction of SPY over the next three months or so.  Looking at the average value and strength of these three signals, we can conclude that BarChart.com thinks that the price of SPY will stay about the same over the next three months.

Stock Market Technical Analysis - Barchart SPY Long Term Opinion April 11 2014

Source: BarChart.com

Easy Notes: BarChart.com says that the price of SPY will probably stay about the same over the next three months.  This is the 5th consecutive “neutral” assessment after 5 consecutive weeks at a “bullish” rating.  Only one of three signals is at “buy,” and it’s at weak strength.  Unfortunately, only one of three signals is headed in the right direction (the right direction would mean “buy” signals are strengthening and “sell” signals are weakening).  Overall, this is a neutral assessment.

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Note to my readers…

Due to a busy schedule, I likely won’t be able to post anything the rest of this week. See you this weekend.

Thanks for your continued support…

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State By State Economy – Philadelphia Fed Index for Every U.S. State (thru February 2014)

A state by state economy analysis is provided by the Federal Reserve Bank of Philadelphia each month.  How’s your state doing?  I’d love to hear about it in the comments section.

NOTE: You may be reading an outdated analysis.  Please visit my latest state by state economy analysis for more info.

On this site, I share a lot of indices that tell us how things are going in the country – for example, my weekly economic indicators roundup.  But what each of you feels is much more related to what’s happening in your specific state.  Wouldn’t it be great if there were an economic index we could follow that tracked exactly that?  Fortunately, that’s what the Federal Reserve Bank of Philadelphia does on a monthly basis, providing us a look at the state by state economy.

They produce a “Coincident State Index” that combines several different economic factors into one number.  This basically tracks the current rate of GDP (measure of all economic output) growth (or contraction if it’s negative) for the state.  The other index is a “Leading State Index” that combines several different leading indicators to predict the annualized pace at which the Coincident State Index will be growing over the next six months.

Philadelphia Fed State Coincident Indexes

Look at the chart below to see how fast each state’s GDP is growing right now.  It’s color-coded, so the green colors mean the state’s economy is growing (the darker the better), and the red colors mean the state’s economy is shrinking (the darker the worse).  Blue indicates essentially no change.

State By State Economy - Philadelphia Fed State Coincident Indexes February 2014

Source: PhiladelphiaFed.org

 

Philadelphia Fed State Leading Indexes

Look at the chart below to see how fast each state’s Coincident Index is expected to grow over the next six months.  This is NOT actually an annualized growth rate over the next 6 months, which means you should roughly double it to estimate what its annual growth rate would be.  It’s color-coded, so blue is the best, and the green colors mean the state’s economy is expected to grow (the darker the better), and the red colors mean the state’s economy is expected to shrink (the darker the worse). continue reading…

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Economic Indicators Roundup (April 7, 2014)

Economic indicators are everywhere, so this is kind of like a dashboard that I like to follow.  For each indicator, I will try to give you a brief description, the latest reading and what I understand to be its implications.  For simplicity, I will assign each a rating of positive, neutral or negative.  For the economic indicators, I will denote in each one’s section how I decide which rating to give it.  At the end, I assign an overall rating, but this is just to guide me in my takeaway of where things stand.  It’s not scientifically rigorous or anything.

  • Positive - indicative of a healthy, growing economy.
  • Neutral - indicative of a slow or no growth economy but not a contracting (recession) economy.
  • Negative - indicative of a shrinking economy or recession.

(NOTE: For a “Quick ‘n Easy” read, just review the labeled white boxes, then skip to my “Easy Take” summary at the end.  You can review any charts/graphs afterward.  I want to make sure no one is intimidated by the length of my posts, even though I’m trying to making them easy …)


Quick Summary

Indicator (Click for details – only works if full article is open) Current Rating (change from previous roundup)
ADS Business Conditions Index Positive
Bloomberg Financial Conditions Index Positive
Daily Consumer Leading Indicators Negative
Citigroup Economic Surprise Index Negative   (Downgrade)
Employment Trends Index Positive
Chicago Fed National Activity Index Neutral
Easynomics Real Estate Price Stability Index Positive
Easy Trends Dashboard   (min/max -3 to +3) +2.56 = Definitely moving in a positive direction, with very few unconfirmed trends or off-trend readings

NOTE: You may be reading an outdated analysis.  Please visit my latest economic indicators roundup.



Economic Indicator: ADS Business Conditions Index   |   POSITIVE
Easy Intro to ADS Business Conditions Index   |   Link to Source   |   Latest Date This Info Represents: March 29, 2014

Quick ‘n Easy

A combination of several key indicators of business conditions suggests, with high confidence, that at the end of December 2013 (most recent date for which there is data for all components of the index), conditions were below average (-0.486).  As of about a week and a half ago, it suggested, with low confidence, that current conditions were virtually average (+0.067), historically speaking.  The index suggests that economic activity took a temporary dive in late 2013 before bouncing back quickly to levels that are around historical averages.

Economic Indicators - ADS Business Conditions Index March 29 2014

Source: PhiladelphiaFed.org

Easy Description: Combines several indicators together to describe current business conditions.  A value above zero means that conditions are better than average, but below zero means worse than average.

Latest Readings:

March 29, 2014: Positive (+) 0.067 (includes weekly unemployment figures and maybe one other indicator)

One week prior: Positive (+) 0.087
One month prior: Positive (+) 0.117
One quarter prior: Negative (-) 0.470

The most recent date for which there is data for all components of the index is end of December 2013, when conditions were below average (-0.486).

Implications: It looks like conditions took a hit after reaching an interim high in mid-November 2013.  Fortunately, we never went into a recession-type shrinking phase, and preliminary data suggest that conditions quickly bounced back up to above average levels since mid-February.

Additional Info: This index provides confident readings about the past when all of the indicators have been collected (everything to the left of the left-most vertical line).  The readings in between the two vertical lines are somewhat less confident because they include some, but not all, of the indicators.  And the latest reading always falls to the right of the right-most vertical line and includes only a couple of indicators.

Easynomics Rating Methodology: For this index, I will use the very latest reading and rate anything between zero and minus (-) 1.00 as “neutral” – anything above or below that will be rated “positive” or “negative” respectively.

continue reading…

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