Recession warnings

[Mercury]

Coming back to the thread topic, after an interesting but I guess off topic segue into the world of EWT (sorry if any non EWT guys were a bit bored by that), I saw this clip this morning and was intrigued by the overarching comment.  Not sure if you can see it without registering but hopefully you can, basically this guy is saying he has never seen marco data so poor in his career, he is not a teenager...

https://app.hedgeye.com/insights/77189?utm_medium=email&utm_campaign=Market Brief 1566313218&utm_content=Market Brief 1566313218+CID_f8fc8b4b8585015a19d0713ea37ca7c1&utm_source=campaignmonitor email&utm_term=Worst Global Economic Data Of My Career

[Guest ChrisN]

And I should add that an economic recession is generally accepted to be a reduction in growth (GDP) in two or more consecutive quarters. Nothing to do with 20% although it's fair to say the stock market is likely to fall!

[Mercury]

And just before anyone trots out the inference that Hedgeye and zerohedge are all about the crash, it seems Hedgeye at least are not ready to call a recession yet.  Hardly surprising as no one really can until it is official and by then it is already well on.  If we see a recession in 2020 it may have already started...

https://app.hedgeye.com/insights/77244?utm_medium=email&utm_campaign=Market Brief 1566313218&utm_content=Market Brief 1566313218+CID_f8fc8b4b8585015a19d0713ea37ca7c1&utm_source=campaignmonitor email&utm_term=READ MORE

[Caseynotes]

2 minutes ago, Mercury said:

And just before anyone trots out the inference that Hedgeye and zerohedge are all about the crash, it seems Hedgeye at least are not ready to call a recession yet

Actually I already did this in the Indices thread back on 11th Aug, I stopped following both of them ages ago due the bearish bias > prejudice > derangement, it was like 2016 all over again, every day endless bleating about this time it's for real, at first it was boring, then it got on your nerves and you just switched off, and then the Trump election win and the bull run was up and away again, just like that, oh how we laughed.

A recession is min of 2 consecutive quarters of negative GDP and has happen twice since 2000 but look to the poor GDP leading up to it, currently US GDP remains strong.

[Mercury]

@ChrisN,

I think the GDP decline measure is more of a political short hand convention, so on the one had you are right about the 2 quarters of decline.  However, the National Bureau of Economic Research (NBER) is the font of all recession call wisdom, in the US at least.  They define a recession as follows (excerpt from an old article - 2003):

"A recession is a significant decline in activity spread across the economy, lasting more than a few months, visible in industrial production, employment, real income, and wholesale-retail trade. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between trough and peak, the economy is in an expansion. Expansion is the normal state of the economy; most recessions are brief and they have been rare in recent decades.

Because a recession influences the economy broadly and is not confined to one sector, the committee emphasizes economy-wide measures of economic activity. The traditional role of the committee is to maintain a monthly chronology, so the committee refers almost exclusively to monthly indicators. The committee gives relatively little weight to real GDP because it is only measured quarterly and it is subject to continuing, large revisions.

The broadest monthly indicator is employment in the entire economy. The committee generally also studies another monthly indicator of economy-wide activity, personal income less transfer payments, in real terms, adjusted for price changes. In addition, the committee refers to two indicators with coverage of manufacturing and goods: (1) the volume of sales of the manufacturing and trade sectors stated in real terms, adjusted for price changes, and (2) industrial production."

I highlighted 2 phrases:

• The first means that at the point we tip into recession everything looks good, which it broadly is not at face value and certainly there are many people trying to tell us so but they are all Bulls or have a reason to keep people invested... (in my opinion!)
• The second means that GDP is largely irrelevant

In fact it seems that we can have a recession without negative GDP, who knew!  In a RealVision interview recently, part of their recession watch series, there was a guy who had inside knowledge of the NBER (can't remember his name but I think I posted on it previously), who defined a recession, in terms of data sets, as follows, in line with the NBER:

1. Real business sales (Trade and manufacturing)
2. Industrial production
3. Employment
4. Real personal income (net of government transfers)

General economist and professional observers consensus seems to be that, in the US, the first 2 are either in recession territory or under pressure and so is #4 (much of the job expansion has been in the gig economy with people needing more than 1 job to make ends meet because salaries are poor).  So only employment itself remains and, as Real Visions Recession Watch points out, employment is the last measure to turn.

Other economists seem to think that while industry is in recession, the consumer and services are not and anyway the US economy is largely services in nature.  But what do they service?  If people stop buying stuff then that is surely the tip of the iceberg?  From there it is a negative spiral that feeds on itself.  Just because we got out of it in 2015/16 doesn't mean that will happen again.  This time it is different?  I doubt it.  One thing is universally true, after every boom there is a bust.  Just ask Gordon Brown what it feels like to think this time it is different.  This is the very essence or capitalism and maybe its Achilles heal @dmedin, you are probably right that it need a rework but we will only get that after a sufficiently painful crash to make people see we need it.

So net, GDP is not something I bother too much with, except to watch short term volatility around data releases.  I can't measure the other stuff, only look at the facts around me and what professionals who do have access to this data are saying with an open mind.  BTW, I see lots of evidence of retail under pressure in the UK, if someone is hoping the consumer will save us think again...

 

On a separate note @ChrisN, you are right about not rising to the bait of people being down on your method, it is just boring and irritating, I don't read their posts and don't engage anymore because they don't actually want a conversation, they just want to win an argument.  Waste of time and energy.  Positive debates on the other hand, an exchange of ideas, even if we disagree, is a good place to be.  Let's have more of that please...  And trade ideas, that would be good right?  Discussing trade ideas regardless of what method you use to get there...

 

[Guest ChrisN]

Thanks Mercury fully get that. On topic again. This is what the fuss is about. Inverted yield curves. As for choice of colour ...take your pick. Mine's blue but even that is very close now. Pretty easy to see why this has been regarded as a reliable indicator. The grey vertical bars are recessions. Hope it helps.

[Guest ChrisN]

And this needs watching like a hawk. Care to guess what it is?

Put you out of your misery!, It's the SX7E - EuroStoxx Banking Index. What's that? Well it's the biggest (roughly 25) banks in Europe (not UK). If they don't pull their skirts up soon....all will be revealed!!

[Mercury]

But of course the Bull argument now switched to, "yeah but the recession doesn't come until X months after the inversion and the central banks wont let it happen, "never fight the Fed" and Trump wont let it happen in an election year and on and on, summarises as "this time it is different".  I think this time it will be exactly the same as every other time, except worse because the expansion was far greater than before.  Don't fight the Fed?  I say don't fight history.

As regards the Eurostoxx, I've seen that one trotted out recently a few times.  Bottom line is Draghi's policy, which BTW might prove illegal in German (talk about a Black Swan!), is making it impossible for banks to make money.  Not a great economic model that...  I think banks will be a huge buy when the dust settles, the ones that survive that is...

[Guest ChrisN]

@MercuryI think the FRED chart backs up where are we in the cycle. I reckon towards the latter stages so still a bit further to go - hence my wave 4 thought/count (Don't go there). The recent quarterly reports out of US were generally better than expected. When I'm feeling euphoric I'll let you know!

[Guest ChrisN]

@TrendFollower,

I'm sorry i thought we had addressed this. See my earlier post on the previous page.

OK try this as a starter https://www.elliottwave.com/articles  (I don't think it's behind a paywall)

You can enrol free and will get several articles/video links per week covering all areas. Give it time and keep an open mind.

If you are intrigued there are several other good sources and cheaper advised professional services available. Like me you'll have to do your own due diligence I'm afraid. There's no short cut.

35 minutes ago, TrendFollower said:

Being able to quantify that using EWT and Fibonaccci increase my winning percentage by   X% and increase my profits by £X.00 is crucial to understanding the significance EWT can have in your trading strategy. 

How anyone could ever be expected to answer that is beyond me I'm afraid. And if they did I wouldn't believe them.

Finally, sir, I respectfully ask you to draw a line under it.

[Mercury]

LOL @ChrisN, yes please do let us know if you get euphoric and what you were taking...

Agree your assessment of on the FRED.  It seems we are aligned in most things except the EWT phase.  I think the fundamentals and technicals support both as both are end game scenarios.  If your road map turns out to be a wave E then you will exactly align with mind, I think.  Your Wave 4 (A-B-C) would suggest a lower low, which would be something different to me but let's examine that on another thread when and if it happens.

For now we agree we are at or close to the end of the bull cycle, let's see how it evolves.  BTW I am tactically long the FTSE from last nights low, gotta keep am open mind when trading and take the opportunities that present themselves...

[Guest ChrisN]

4 minutes ago, Mercury said:

BTW I am tactically long the FTSE from last nights low, gotta keep am open mind when trading and take the opportunities that present themselves.

More of a DOW man myself. I see this correction going a bit higher to a wave 2 top. If I'm right then get on board there because 3 down will be long & strong!

Late cycle it is then. Hope that's not too much group think.

[Mercury]

Don't think 2 makes a group...

[dmedin]

1 hour ago, TrendFollower said:

Being able to quantify that using EWT and Fibonaccci increase my winning percentage by   X% and increase my profits by £X.00 is crucial to understanding the significance EWT can have in your trading strategy. 

 

The basic premiss (as far as I understand it) is being able to spot highs and lows and make an informed guess as to which way price is going to go next. 

Apparently the idea of an extended third wave is the most important (according to Frost and Prechter).   The third is always the biggest impulse wave.  There are a couple of other bits like wave 2 never retracing more than 100% of wave 1 and corrections always being in three waves, but there's a huge amount of leeway in terms of how you can number your phases and that is what makes it arcane and subjective.

Edited August 21, 2019 by dmedin

[dmedin]

Notice the W and the X (???) and the insane amount of nesting.  Switching between 5s and 3s willy-nilly.

 

https://elliottwave-forecast.com/video-blog/gold-2700-area-should-be-in-the-horizon/

 

Good luck with this:

 

https://elliottwave-forecast.com/news/elliott-wave-view-rally-facebook-corrective/

Edited August 21, 2019 by dmedin

[Guest ChrisN]

Quite. Thanks for the great example. He correctly identified the low of wave 2 at 1270 and gave a big hint as to what he expected next. "Turning Up". A big move up in 3 which went off the top of  chart!! If you know what you're looking at or employ the services of someone who does then I would regard the above as an excellent example of the power of EWT. Thanks again.

[Mercury]

Agree @ChrisN and @dmedin that is pretty much what I had already posted in my Gold/Silver rally thread, except that mine was a more simplified version of the same thing.  At the time I couldn't decide if it was a 1-2 or a pennant consolidation (chartist rather than EWT technique) and the retrace did not go as low as I had expect; although it worked very well on Silver, which is one reason I prefer to trade Silver.

As ChrisN said, great example of a classic complex retrace, EWT analysts will lap that up every time and get Long the breakout, which is what I did.  But hey, if it does't work for you fair enough, find something else that does.

[dmedin]

42 minutes ago, Mercury said:

But hey, if it does't work for you fair enough, find something else that does

I didn't say that.  I just said I don't understand it

[Mercury]

Ah!  I misunderstood the nature of your posts @dmedin, seemed like you were negatively disposed.  All I can say is it is easy enough to get the basics and then expand into the more complex structures but it take a lot longer to practice it, make mistakes and learn from experience.  Even following someone is not a solution as even professionals get it wrong from time to time, actually quite a lot.  Best way is to post your analysis maybe and ask for a critique (from fellow EWT analysts not naysayers, they will sap your mojo if you let them).  

[phillo]

this guy's been calling for a drop for as long as I can remember - https://northmantrader.com/2019/08/20/spx-2126/

[Guest ChrisN]

2 hours ago, dmedin said:

I didn't say that.  I just said I don't understand it

Just because you don't understand something is no reason, in my humble opinion, to doubt it. I don't understand Swahili, quantum physics nor Chinese mythology. Advanced EWT is not to be taken lightly but that should not in itself put you off. It can be massively simplified, using different timelines helps, and you certainly don't have to able to label W-X-Y (and sometimes Z!). It probably should be thought of more as an art form (subject to analyst's experience/judgement) rather than a science. It is simply, at the end of the day, recording sentiment. DSI is frequently used along with momentum/fibs as supporting tools. Can't remember who said it but "In the short term the market is a voting machine. Only in the long term does it become a weighing machine". 

Some want hard, definite results. It cannot do that. Nothing can in my experience, but if interpreted correctly it will give you a map of the way forward and therefore low risk entry points.  Once you accept that the market is not driven by the MSM then you may be onto something. For example consider GBP/USD  Brexit result at the end June 2016. Pound fell quite hard. The actual high of that wave occurred a full YEAR earlier around $1.70/£. Brexit was just a small portion of that wave but not the "cause" for the wave down. MSM dip into their drawer and pull out all sorts of arbitrary labels that they can slap on to try and explain "why". Often laughable and frequently contrary. Consequently, unless from a reliable & reputable source, I don't bother wasting my time reading it ( @elle  that's my reply to you if that's acceptable?). If you understand that markets top on euphoria and bottom on despair then you're half way there. If you want results fast then you'll probably have to pay - but use a reliable source. Hopefully that is of some use ....and really, really I'm not here to sell EWT!  As a side note I also use EWT to make some of my portfolio decisions

As @Mercury said "But hey, if it does't work for you fair enough, find something else that does." I'd fully endorse that. Use it or don't. It's up to you but please refrain from insulting other EWT followers because you "don't understand it". 

Enough said, and no offense taken. Can we please now move on from EWT?  Thank you and apologies for the length.

[Caseynotes]

[phillo]

36 minutes ago, ChrisN said:

Just because you don't understand something is no reason, in my humble opinion, to doubt it. I don't understand Swahili, quantum physics nor Chinese mythology. Advanced EWT is not to be taken lightly but that should not in itself put you off. It can be massively simplified, using different timelines helps, and you certainly don't have to able to label W-X-Y (and sometimes Z!). It probably should be thought of more as an art form (subject to analyst's experience/judgement) rather than a science. It is simply, at the end of the day, recording sentiment. DSI is frequently used along with momentum/fibs as supporting tools. Can't remember who said it but "In the short term the market is a voting machine. Only in the long term does it become a weighing machine". 

Some want hard, definite results. It cannot do that. Nothing can in my experience, but if interpreted correctly it will give you a map of the way forward and therefore low risk entry points.  Once you accept that the market is not driven by the MSM then you may be onto something. For example consider GBP/USD  Brexit result at the end June 2016. Pound fell quite hard. The actual high of that wave occurred a full YEAR earlier around $1.70/£. Brexit was just a small portion of that wave but not the "cause" for the wave down. MSM dip into their drawer and pull out all sorts of arbitrary labels that they can slap on to try and explain "why". Often laughable and frequently contrary. Consequently, unless from a reliable & reputable source, I don't bother wasting my time reading it ( @elle  that's my reply to you if that's acceptable?). If you understand that markets top on euphoria and bottom on despair then you're half way there. If you want results fast then you'll probably have to pay - but use a reliable source. Hopefully that is of some use ....and really, really I'm not here to sell EWT!  As a side note I also use EWT to make some of my portfolio decisions

As @Mercury said "But hey, if it does't work for you fair enough, find something else that does." I'd fully endorse that. Use it or don't. It's up to you but please refrain from insulting other EWT followers because you "don't understand it". 

Enough said, and no offense taken. Can we please now move on from EWT?  Thank you and apologies for the length.

Well I guess @ChrisN  to quote you , as none of us represent a "reliable & reputable source" you wont be bothering  wasting your time reading any of our posts in the future

[Guest ChrisN]

@Caseynotes Hah! You betcha bottom dollar fella!

After Donald Trump became US President he went on a fact-finding visit to Israel. While he was on a tour of Jerusalem he suffered a heart attack and died. The undertaker told the American diplomats who were accompanying him, 'You can have him shipped home for $50,000, or you can bury him here in the Holy Land, for just $100.

The American diplomats went into a corner and discussed this for a several minutes. They came back to the undertaker and told him they wanted the president shipped home.

The undertaker was puzzled and asked, 'Why would you spend $50,000  to ship him home, when it would be wonderful to be buried here, in the Holy Land, and you would spend only $100?'

The American diplomats replied, 'A long time ago a man died here, was buried here, and three days later he rose from the dead. We just can't take that risk.'

Boom! Boom!

@elle  I'm very interested in what YOU have to say. I love opinion but a I said I limit my MSM reading otherwise it can get oppressive. You can't read it all...life's too short. I'm sorry if you found my response lacking.

[phillo]

A reliable & reputable source : - https://www.afr.com/markets/debt-markets/powell-s-tricky-balance-at-jackson-hole-20190822-p52jjf?&utm_source=twitter&utm_medium=social&utm_campaign=nc&eid=socialn:twi-14omn0055-optim-nnn:nonpaid-27/06/2014-social_traffic-all-organicpost-nnn-afr-o&campaign_code=nocode&promote_channel=social_twitter

[Mercury]

Central banks keep options open - stop the presses..!

Could it be they don't know what's going on?  And haven't a clue what to do about it anyway...

[Mercury]

UK CBI Distributive Trades Survey data is interesting this time, not for a short term trade, not what I do, but more because the data was so negative (-49% vs consensus of -11%).  Traditional "wisdom" is that this is bad for GBP so sell right?  Well maybe, maybe but I think GBPUSD is more about USD than GBP these days.

Why is it interesting to me?  Well it is a strong signal that all is not well in Retail, which chimes with the general zeitgeist out there for me.  Is this a Brexit thing?  No one really knows but the reality is that retail has been under pressure for ages and not just in the UK.  For me it is additive to the general picture overhanging the world economy in terms of the chances of a recession.

There was an interesting piece on Real Vision this morning that touches on where we are in terms of recession etc.  Interesting take on alternative signals of consumer pressure (US based) and views on the inverted yield curve.  Most interesting piece is the relationship between Oil price spikes and recession triggers, not the first time I have heard this.

Short term he is saying we aren't there yet but he is not saying don't worry, just worry later.  Very interesting hedge idea, heard this in another context as a potential long term buy.

https://www.realvision.com/tv/shows/trade-ideas/videos/oil-vs-the-yield-curve

[phillo]

I believe these 3 US retailers "reported" recently. US retail recession ? 

[Mercury]

That's right @elle, that is why economists are saying it isn't here yet, so do I.  We aren't there yet.

[phillo]

https://fivethirtyeight.com/features/economists-are-bad-at-predicting-recessions/