Friday, July 23, 2010

A New Type of Death Cross

I have been waiting for this to occur. It is what I think of as a different kind of "death cross". In standard charting terminology, that is a cross of a short moving average from above to below a longer one. An example is a stock the 50 day moving average of which breaks below the 200 day moving average.

The accompany is from the Consumer Metrics website. Its "contraction watch" from today incorporates data through July 21.

They have identified growth contractions in 2006, 2008 and 2010 (green, red and blue lines respectively). As you see, the 2008 consumer recession as Consumer Metrics measures it (not the entire economy and not even the entire consumer economy) was receding at the duration at which their metrics are still declining.

You may visit their website for their parameters.

The first chart on their site suggests that their data leads the Bureau of Economic Analysis GDP data by a quarter or so. Whether any of this has predictive value for financial investing is unknown, but what my eye tells me looking at this chart is that there is a significant amount of economic weakness amongst the people of the United States, and that the "recovery" ended some time ago.

If only the powers that run up the bills in Washington would join the people in trying to delever rather than print and borrow money, as in the 1950s, a proper economic recovery would be more likely to occur.

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