TomT Stock Market Model 2013-10-28

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Copyright 2013 Tom Tiedeman, Washington, D.C. All rights reserved. 1This private letter tries to provide somewhat objective research, not investment advice.

Modest Posi t ive Expecta t ions

My stock market models, forecasting the Value LineArithmetic Index, are projecting near-average stock

market performance over the next 6 months to5/1/2014.

Probable 6 month m arke t ga in : 5% to 6%Probabil i ty o f a t least breaking even: 73%Probabil i ty o f an 8%+ dip a long the w ay: 9%.

The basic drivers of the rebounding stock market are stillin place, but weaker:

1: Economic performance remains below potential thatleaves room for improvement but, less room thanbefore .

2: Leading economic indicators are slowly rising but,they are wobbly, conflicted, and near-flat .

3: Recession probabilities remain low because theFederal Reserve continues to hold down interest rates but, worry grows about what will happen when thecurrent extraordinary measures of the Fed are scaledback or stopped .

A consequence of todays weaker economic drivingforces is that random factors like the dysfunctionalCongress will be relatively more important goingforward. That implies that econometric stock marketmodels, like mine, will probably be somewhat lessaccurate over the next few years.

All that really matters, though, is that the models get themain story right:

Really big move up: not so likely nowReally big fall: very unlikely without a Black SwanBumpy normal with a positive tilt: my best guess

Ma y s fo recas t worked ou t u nusu al ly wel l .

Forecast ActualProbable market gain: 12% 11%Prob. of gaining: 83%8%+ midcourse dip: 50% Hit -5%

Real time results of the models have been publishedsince May, 2007. See updated graphs at the back ofthis report comparing the model s forecasts with reality.

Market Valuation Measures Most measures consider the market to be near fairvalue. However, the indicator Warren Buffet likes best .50+ Other Ind icators Som e People Follow

Market Valuation Measures Several measures see the stock market as modestlyovervalued. A short-term pullback of perhaps 5% seemslikely.

Economic Indicators Only about 11% of U.S. economists expect any sort ofrecession in the U.S. in the coming year. MostComposite Leading Economic Indicators anticipate flatprospects. U.S. business profits should continue to behigh as debt costs are at the lowest relative levels inseveral hundred years and businesses already are lean.Though profits should stay high, there isnt much roomfor quick expansion.

Trader Signals - Fast By the time you read this, these short term signals maygive an entirely different picture. At the moment anoverbought market makes a near-term small pullbacklikely.

Trader Signals SlowThe long running Second Great Contraction will likelycontinue to play out as a decade-long grind much likethe 1930s. Statistically we are entering the better half ofthe year for stocks. The Presidential Cycle suggestssomewhat sub-par returns.

International View

Growth estimates generally are weak. Emergingeconomies could be hit hard when the Federal Reservescales back stimulus. Government austerity in Europeand the U.S. is a negative factor.

Econometric Market Models I cant find many econometric forecasts with documentedlong term performance. My models remain positive.Some other models are less encouraging. Value Line, inparticular, forecasts weak prospects for stock gains overthe coming 3 to 5 years a sell signal.

Please tell me if you come across other market models

with documented performance.

Six-Month Stock Market Indicators October 28, 2013 A 6 month stock market forecast plus 50+ other market timing indicators looking a few months ahead

Overview


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Copyright 2013 Tom Tiedeman, Washington, D.C. All rights reserved. 3This is research, not investment advice.

About the indicator: This popular classic stock marketvaluation model starts from the simple premise that theearnings to price ratio (E/P) of basket of quality stockslike the S&P 500 index and the yield from long termquality bonds should be just about the same, with thestocks having a little higher return to reflect their higherinherent risk. This Mark Hulbert (MarketWatch.com)article says there is not much predictive value to theindicator. My own analysis finds no statistical link inthe 6-month time frame between P/E ratios and theS&P-500 average.

Value Line 3-5 Year Appreciation PotentialStatus: On October 18 this estimate was 40% justlike the high point last May. This is a definite warningsignal for this long term indicator.About the Indicator: As it has for many years, each weekthe Value Line Investment Survey announces an estimateof the three to five year median appreciation potential forthe 1700 stocks they track. The lowest recent appreciationestimate was 35% at the previous market high on

7/13/2007. The highest appreciation potential recorded was185% at the panic market low of 3/9/2009. In general, areading of 55% points to a sell and 100% signals buyaccording to this Mark Hulbert MarketWatch.com article

Tobins Q (VectorGrader.com).Status: Neutral to mildly negative.About the Indicator : (From VectorGrader.com linkedpage) The Tobin's Q is the ratio of price to replacementcost, which is in many ways similar to book value. It wasdeveloped by Economic Nobel laureate James Tobin inthe 1960s as a metric for valuing the stock market.The Q ratio can be calculated from the most recent

Federal Reserve Flow of Funds release. The ratio iscalculated by dividing line 35 of table B.102 by line 32.The historical data is also available on the St. LouisFRED website . However, because the Flow of Fundsreport is released long after the quarter end, we updatethe Q ratio for the change in stock prices since the mostrecent flow of funds report.
http://www.marketwatch.com/story/fed-model-more-bullish-than-in-decades-2011-09-20?dist=afterbellhttp://www.marketwatch.com/story/fed-model-more-bullish-than-in-decades-2011-09-20?dist=afterbellhttp://www.marketwatch.com/story/where-stock-market-will-be-in-fall-of-2016-2012-09-28?link=home_carouselhttp://www.marketwatch.com/story/where-stock-market-will-be-in-fall-of-2016-2012-09-28?link=home_carouselhttp://www.marketwatch.com/story/where-stock-market-will-be-in-fall-of-2016-2012-09-28?link=home_carouselhttp://www.vectorgrader.com/indicators/tobins-qhttp://www.vectorgrader.com/indicators/tobins-qhttp://www.federalreserve.gov/releases/z1/default.htmhttp://www.federalreserve.gov/releases/z1/default.htmhttp://www.federalreserve.gov/releases/z1/default.htmhttp://www.federalreserve.gov/releases/z1/default.htmhttp://research.stlouisfed.org/fred2/graph/?&chart_type=line&graph_id=&category_id=&recession_bars=On&width=630&height=378&bgcolor=%23B3CDE7&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&ts=8&preserve_ratio=true&fo=ve&id=MVEONWMVBSNNCB_TNWMVBSNNCB&transformation=lin_lin&scale=Left&range=Max&cosd=1949-10-01&coed=2010-04-01&line_color=%230000FF&link_values=&mark_type=NONE&mw=4&line_style=Solid&lw=1&vintage_date=2010-10-04_2010-10-04&revision_date=2010-10-04_2010-10-04&mma=0&nd=_&ost=&oet=&fml=a%2Fbhttp://research.stlouisfed.org/fred2/graph/?&chart_type=line&graph_id=&category_id=&recession_bars=On&width=630&height=378&bgcolor=%23B3CDE7&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&ts=8&preserve_ratio=true&fo=ve&id=MVEONWMVBSNNCB_TNWMVBSNNCB&transformation=lin_lin&scale=Left&range=Max&cosd=1949-10-01&coed=2010-04-01&line_color=%230000FF&link_values=&mark_type=NONE&mw=4&line_style=Solid&lw=1&vintage_date=2010-10-04_2010-10-04&revision_date=2010-10-04_2010-10-04&mma=0&nd=_&ost=&oet=&fml=a%2Fbhttp://research.stlouisfed.org/fred2/graph/?&chart_type=line&graph_id=&category_id=&recession_bars=On&width=630&height=378&bgcolor=%23B3CDE7&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&ts=8&preserve_ratio=true&fo=ve&id=MVEONWMVBSNNCB_TNWMVBSNNCB&transformation=lin_lin&scale=Left&range=Max&cosd=1949-10-01&coed=2010-04-01&line_color=%230000FF&link_values=&mark_type=NONE&mw=4&line_style=Solid&lw=1&vintage_date=2010-10-04_2010-10-04&revision_date=2010-10-04_2010-10-04&mma=0&nd=_&ost=&oet=&fml=a%2Fbhttp://research.stlouisfed.org/fred2/graph/?&chart_type=line&graph_id=&category_id=&recession_bars=On&width=630&height=378&bgcolor=%23B3CDE7&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&ts=8&preserve_ratio=true&fo=ve&id=MVEONWMVBSNNCB_TNWMVBSNNCB&transformation=lin_lin&scale=Left&range=Max&cosd=1949-10-01&coed=2010-04-01&line_color=%230000FF&link_values=&mark_type=NONE&mw=4&line_style=Solid&lw=1&vintage_date=2010-10-04_2010-10-04&revision_date=2010-10-04_2010-10-04&mma=0&nd=_&ost=&oet=&fml=a%2Fbhttp://research.stlouisfed.org/fred2/graph/?&chart_type=line&graph_id=&category_id=&recession_bars=On&width=630&height=378&bgcolor=%23B3CDE7&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&ts=8&preserve_ratio=true&fo=ve&id=MVEONWMVBSNNCB_TNWMVBSNNCB&transformation=lin_lin&scale=Left&range=Max&cosd=1949-10-01&coed=2010-04-01&line_color=%230000FF&link_values=&mark_type=NONE&mw=4&line_style=Solid&lw=1&vintage_date=2010-10-04_2010-10-04&revision_date=2010-10-04_2010-10-04&mma=0&nd=_&ost=&oet=&fml=a%2Fbhttp://research.stlouisfed.org/fred2/graph/?&chart_type=line&graph_id=&category_id=&recession_bars=On&width=630&height=378&bgcolor=%23B3CDE7&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&ts=8&preserve_ratio=true&fo=ve&id=MVEONWMVBSNNCB_TNWMVBSNNCB&transformation=lin_lin&scale=Left&range=Max&cosd=1949-10-01&coed=2010-04-01&line_color=%230000FF&link_values=&mark_type=NONE&mw=4&line_style=Solid&lw=1&vintage_date=2010-10-04_2010-10-04&revision_date=2010-10-04_2010-10-04&mma=0&nd=_&ost=&oet=&fml=a%2Fbhttp://www.federalreserve.gov/releases/z1/default.htmhttp://www.federalreserve.gov/releases/z1/default.htmhttp://www.vectorgrader.com/indicators/tobins-qhttp://www.marketwatch.com/story/where-stock-market-will-be-in-fall-of-2016-2012-09-28?link=home_carouselhttp://www.marketwatch.com/story/fed-model-more-bullish-than-in-decades-2011-09-20?dist=afterbell


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Despite all of its semi-random craziness, eventually thestock market reflects corporate profits which in turnreflect the economy and especially interest rates.Usually the stock market nervously anticipates ( andover-reacts to) economic conditions by several months.The indicators here are my favorites for looking aheadfor the economy 6 months to a year.

Economic Cycles Research Institute U.S.Leading Indicator (Scroll down on the linked page)U.S. Leading Economic Indicator (e-forecasting.comSee bottom of linked page.)Philly Fed 6 Month Leading Indicator (St. LouisFederal Reserve ) Conference Board Leading Economic Index Organization for Economic Cooperation andDevelopment . Status: Most composite leading economic indicators areneutral to somewhat negative, signaling slow or stalledeconomic growth aheadAbout the indicators: These are just a few of thegroups that compile and aggregate statistics of several

economic factors that tend to lead the economy both upand down. Changes and directions of the leadingeconomic indicators are worth paying attention to. Aspictured below, there is a strong long term linkagebetween composite leading indicators and periods ofrecession.

Anxious Index for Recession Probability(Philadelphia Fed. xls file)Status: On average, the gurus of economics haveeased off their fears of a near-term recession. As of8/16/2013 a panel of 54 economists polled by thePhiladelphia Federal Reserve sees about a 11% chanceof another recession in the coming year. (Next AnxiousIndex release on November 15, 2013.)About the indicator: This article by David Leonhardt inthe NY Times in February, 2008 coined the popularname for this index. This Survey of ProfessionalForecasters maintained by the Philadelphia FederalReserve hasn't missed calling a recession or called afalse positive in all the years since 1968 when it wasstarted. This Anxious Index is the successor to theearlier Livingston Index a personal project of aPhiladelphia journalist.

Effective Federal Funds Rate (from St. LouisFederal Reserve)Status: . In essence the Fed is paying banks to borrow!Eventually rate cuts will stimulate the economy. But,because of lag times, for now it remains a contraryreminder of just how worried they are at the FedAbout the indicator : The Federal Reserve largelycontrols interest rates. Interest rates largely determinebusiness profitability. And profitability controls the stockmarket. Enough said. MarketWatch.com forecast ofinterest rates (sometimes the link works)

Probability of Recession Predicted by InterestRate Spread (NY Federal Reserve Go to linked page oruse your browser zoom on the chart below.) St. LouisFed Recession Model (data can be downloaded)l

Select to view:Overview Market Valuation Measures Economic Indicators

Trader Signals - FastTrader Signals SlowInternational ViewEconometric Models About This Forecast

Six-Month Stock Market Indicators

Economic Indicators
http://www.businesscycle.com/resources/http://www.businesscycle.com/resources/http://www.businesscycle.com/resources/http://www.e-forecasting.com/US_Leading_Economic_Indicator.htmhttp://research.stlouisfed.org/fred2/series/USSLINDhttp://research.stlouisfed.org/fred2/series/USSLINDhttp://www.conference-board.org/data/bcicountry.cfm?cid=1http://www.conference-board.org/data/bcicountry.cfm?cid=1http://www.conference-board.org/data/bcicountry.cfm?cid=1http://www.conference-board.org/data/bcicountry.cfm?cid=1http://stats.oecd.org/Index.aspx?DatasetCode=MEI_CLIhttp://stats.oecd.org/Index.aspx?DatasetCode=MEI_CLIhttp://stats.oecd.org/Index.aspx?DatasetCode=MEI_CLIhttp://www.philadelphiafed.org/files/spf/anxious_index_chart.xlshttp://www.nytimes.com/2008/02/12/business/12cnd-econ.html?ref=businesshttp://www.nytimes.com/2008/02/12/business/12cnd-econ.html?ref=businesshttp://www.nytimes.com/2008/02/12/business/12cnd-econ.html?ref=businesshttp://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/http://www.philadelphiafed.org/research-and-data/publications/business-review/1997/march-april/brma97dc.pdfhttp://www.philadelphiafed.org/research-and-data/publications/business-review/1997/march-april/brma97dc.pdfhttp://research.stlouisfed.org/fred2/series/FFhttp://research.stlouisfed.org/fred2/series/FFhttp://www.marketwatch.com/news/economy/economic_calendar.asp?siteIdhttp://www.marketwatch.com/news/economy/economic_calendar.asp?siteIdhttp://www.marketwatch.com/news/economy/economic_calendar.asp?siteIdhttp://www.newyorkfed.org/research/capital_markets/Prob_Rec.pdfhttp://www.newyorkfed.org/research/capital_markets/Prob_Rec.pdfhttp://www.newyorkfed.org/research/capital_markets/Prob_Rec.pdfhttp://research.stlouisfed.org/fred2/series/RECPROUSM156Nhttp://research.stlouisfed.org/fred2/series/RECPROUSM156Nhttp://research.stlouisfed.org/fred2/series/RECPROUSM156Nhttp://research.stlouisfed.org/fred2/series/FFhttp://research.stlouisfed.org/fred2/series/RECPROUSM156Nhttp://research.stlouisfed.org/fred2/series/RECPROUSM156Nhttp://www.newyorkfed.org/research/capital_markets/Prob_Rec.pdfhttp://www.newyorkfed.org/research/capital_markets/Prob_Rec.pdfhttp://www.bloomberg.com/apps/cbuilder?ticker1=.SPXBOOK:INDhttp://www.marketwatch.com/news/economy/economic_calendar.asp?siteIdhttp://www.marketwatch.com/news/economy/economic_calendar.asp?siteIdhttp://research.stlouisfed.org/fred2/series/FFhttp://www.philadelphiafed.org/research-and-data/publications/business-review/1997/march-april/brma97dc.pdfhttp://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/http://www.nytimes.com/2008/02/12/business/12cnd-econ.html?ref=businesshttp://www.philadelphiafed.org/files/spf/anxious_index_chart.xlshttp://stats.oecd.org/Index.aspx?DatasetCode=MEI_CLIhttp://stats.oecd.org/Index.aspx?DatasetCode=MEI_CLIhttp://www.conference-board.org/data/bcicountry.cfm?cid=1http://www.conference-board.org/data/bcicountry.cfm?cid=1http://research.stlouisfed.org/fred2/series/USSLINDhttp://www.e-forecasting.com/US_Leading_Economic_Indicator.htmhttp://www.businesscycle.com/resources/http://www.businesscycle.com/resources/


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Status: With short term interest rates near zero, the NYFed model sees a negligible 2% probability of being inrecession next year. St Louis sees about a 1.2% chanceof recession.About the indicators: When the Federal Reserveraises short term interest rates high enough theeconomy quiets down -- and possibly goes intorecession. When the Fed lowers interest rates it suppliesa major economic stimulus. Thi s well documented indicator from the New York Federal Reserve is aneconometric model of the probability of economicrecession based on the difference between short terminterest rates and the rate on the 10-year Treasury Note.Raw data The St. Louis Federal Reserve has another recessionindicator that is based on more factors than just interestrates: non-farm payroll employment, the index ofindustrial production, real personal income excluding

transfer payments, and real manufacturing and tradesales

Citigroup Economic Surprise Index Status: (Bloomberg has stopped no-cost coverage ofthis indicator. Since I can only get occasional snapshotsof the Indicator, I dont put much store in it. ) In Augustthe indicator was up but may have peaked.About the Indicator: The stock market reacts stronglyto unexpected news good or bad. This indicator is newto me, but there might just be a chance that this leadsthe market. The Bloomberg.com description of the chartsays: The Citigroup Economic Surprise Indices are

objective and quantitative measures of economic news.They are defined as weighted historical standarddeviations of data surprises (actual releases vs.Bloomberg survey median). A positive reading of theEconomic Surprise Index suggests that economicreleases have on balance beating consensus. Theindices are calculated daily in a rolling three-monthwindow. The weights of economic indicators are derivedfrom relative high-frequency spot FX impacts of 1standard deviation data surprises. The indices also

employ a time decay function to replicate the limitedme mory of markets.

Long Treasury Bond vs DiscountRate (InvestmentTools.com)Status: The difference between the short and long ratesis seldom greater than it is now.About the indicator: Interest rates are a primedeterminant of profitability and of economic activity. Thisis a major long term telltale of where the market will gonext. Long-term interest rates have been falling almoststeadily since 1980, corresponding with overall stockmarket growth over the same period. Federal Reserveactions moving the discount rate, however, are a primaryfactor in short-term business profits and therefore stockmarket prices. For now the big question is when will theFederal Reserve raise rates? Unfortunately, the flip sideof this is that low rates like we now have are a directstatement that the Fed remains deeply worried about theeconomy.

TED Spread (StockCharts.com)Status: The TED spread has been fairly stable at a lowvalue for over a year. Good. The interest rate for bankslending to one another, LIBOR has remainedessentially flat since 2010. Major banks do not seem tobe seriously worried about other banks failing in the nearfuture.About the indicator: Credit markets only becomeinteresting when they fall apart. Lack of credit thenbrings the economy to an abrupt stop. This indicatortracks the difference between the 3-month Treasury rateand the 3-mont h LIBOR -- the interest rate at whichbanks loan to one another. (At least that is what it issupposed to be it the banks arent trying to rig thenumbers.) Normally these two banking insider rates

should be close.

Money Supply (M1 y/y Federal Reserve) (MZMy/y Federal Reserve) Status: We are receiving an open-ended expansion ofthe money supply via QE4.About the Indicator: The economic theory is thatincreasing the money supply should raise asset pricesand lower interest rates. Im not an economist so Illavoid this debate.

Building Permits and Housing Starts (St. LouisFederal Reserve)Status: Construction is definitely up from the pits, buthome building is still at depression levels. Over the nextfew years this could be the most significant sector ofimprovement in the economy.About the indicator: Housing and construction areimportant economic indicators, usually leading the stockmarket by about a year. Housing construction itself is

just about 2% of the economy , but when all relatedfactors such as new appliance purchases housing
http://www.newyorkfed.org/research/capital_markets/ycfaq.htmlhttp://www.newyorkfed.org/research/capital_markets/ycfaq.htmlhttp://www.newyorkfed.org/research/capital_markets/ycfaq.htmlhttp://www.newyorkfed.org/research/capital_markets/allmonth.xlshttp://www.newyorkfed.org/research/capital_markets/allmonth.xlshttp://www.citibank.com.cn/homepage/en/pdf/Financial_Market_Analysis.pdfhttp://www.citibank.com.cn/homepage/en/pdf/Financial_Market_Analysis.pdfhttp://www.investmenttools.com/thefed/long_term_t_bond_rate_minus_discount_rate.htmhttp://www.investmenttools.com/thefed/long_term_t_bond_rate_minus_discount_rate.htmhttp://www.investmenttools.com/thefed/long_term_t_bond_rate_minus_discount_rate.htmhttp://stockcharts.com/h-sc/ui?s=$TED&p=W&b=5&g=0&id=p50764669041http://stockcharts.com/h-sc/ui?s=$TED&p=W&b=5&g=0&id=p50764669041http://www.moneycafe.com/library/libor.htm#graphhttp://www.moneycafe.com/library/libor.htm#graphhttp://www.wikinvest.com/rate/LIBOR/WikiCharthttp://www.wikinvest.com/rate/LIBOR/WikiCharthttp://www.wikinvest.com/rate/LIBOR/WikiCharthttp://research.stlouisfed.org/fred2/graph/?chart_type=line&s%5b1%5d%5bid%5d=M1&s%5b1%5d%5btransformation%5d=pc1http://research.stlouisfed.org/fred2/graph/?chart_type=line&s%5b1%5d%5bid%5d=MZM&s%5b1%5d%5btransformation%5d=pc1http://research.stlouisfed.org/fred2/graph/?chart_type=line&s%5b1%5d%5bid%5d=MZM&s%5b1%5d%5btransformation%5d=pc1http://research.stlouisfed.org/fred2/graph/?chart_type=line&s%5b1%5d%5bid%5d=MZM&s%5b1%5d%5btransformation%5d=pc1http://research.stlouisfed.org/fred2/series/PERMIT?cid=97http://research.stlouisfed.org/fred2/series/PERMIT?cid=97http://research.stlouisfed.org/fred2/series/HOUST?cid=97http://research.stlouisfed.org/fred2/series/HOUST?cid=97http://research.stlouisfed.org/fred2/series/HOUST?cid=97http://www.marketwatch.com/story/housing-is-dead-it-cant-hurt-the-economy-2011-03-24?link=home_carouselhttp://www.marketwatch.com/story/housing-is-dead-it-cant-hurt-the-economy-2011-03-24?link=home_carouselhttp://research.stlouisfed.org/fred2/series/PERMIT?cid=97http://www.bloomberg.com/apps/cbuilder?ticker1=.SPXBOOK:INDhttp://www.marketwatch.com/story/housing-is-dead-it-cant-hurt-the-economy-2011-03-24?link=home_carouselhttp://research.stlouisfed.org/fred2/series/HOUST?cid=97http://research.stlouisfed.org/fred2/series/PERMIT?cid=97http://research.stlouisfed.org/fred2/graph/?chart_type=line&s%5b1%5d%5bid%5d=MZM&s%5b1%5d%5btransformation%5d=pc1http://research.stlouisfed.org/fred2/graph/?chart_type=line&s%5b1%5d%5bid%5d=MZM&s%5b1%5d%5btransformation%5d=pc1http://research.stlouisfed.org/fred2/graph/?chart_type=line&s%5b1%5d%5bid%5d=M1&s%5b1%5d%5btransformation%5d=pc1http://www.wikinvest.com/rate/LIBOR/WikiCharthttp://www.moneycafe.com/library/libor.htm#graphhttp://stockcharts.com/h-sc/ui?s=$TED&p=W&b=5&g=0&id=p50764669041http://www.investmenttools.com/thefed/long_term_t_bond_rate_minus_discount_rate.htmhttp://www.investmenttools.com/thefed/long_term_t_bond_rate_minus_discount_rate.htmhttp://www.businessinsider.com/citigroup-economic-surprise-index-aug-13-2013-8http://www.citibank.com.cn/homepage/en/pdf/Financial_Market_Analysis.pdfhttp://www.newyorkfed.org/research/capital_markets/allmonth.xlshttp://www.newyorkfed.org/research/capital_markets/ycfaq.html


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constitutes a larger slice. These linked charts from theSt. Louis Federal Reserve show clearly that if you haveseveral years of over-building then payback in the formof a dead market for new construction must eventuallyfollow.

Another housing bubble is not likely to start soonaccording to this article by Robert Shiller (NY Times,free subscription required), Housing Bubbles Are Few

and Far Between.

Dollar Index (MarketWatch.com) Dollar Index (StockCharts.com)Status: The race to the bottom in currency valuationscontinues. The Buck has been roughly constant for thepast two years compared to other currencies. From thissummer it has turned down. uptick. Nothing serious yet.About the indicator: The primary difficulty in reducingthe value of the Dollar is that other countries will alsoinflate their currencies in order to maintain their relativetrading advantage.

Household Net Worth (Federal Reserve, see Line44)Status: Improving overall , Thanks mainly to therebounding stock market, total net worth has come backfrom being down $18 trillion an incredible amount. Aproblem, however, is that home prices, where the networth of the middle class is centered, have not risenmuch. The middle class setback is also a setback for theeconomy and the stock market.About the indicator: Net worth is the score that counts.Personal wealth fell by an incredible 18 trillion dollarsduring the Great Recession, equivalent to a full year ofGDP, and it could have been much worse. All that wouldhave been needed for a complete collapse would havebeen for cascading bank, business and personal wealthfailures to get rolling in a domino sequence as they did inthe Great Depression. The couple of trillion dollars thatthe Government threw down as part of the TARP andstimulus efforts looks like a smart investment if it savedus from what could have been another ten or twentytrillion dollars of damage.

U.S. Federal Deficit (St. Louis Federal Reserve)Status: The deficit is shrinking a near term negativefor the stock market.About the indicator: A lot of investors make a lot ofnoise about the deficit, but the deficit does not correlatevery well with changes in the stock market. Still, fear ofthe rising deficit has stopped any chance of furtherstimulus from Congress. So a very slow and falteringrecovery is almost certain.

U.S. Balance of Payments (Federal Reserve link)Status: The balance of payments has stabilized but ata high negative level.About the indicator: The worsening Balance of

Payments probably means little in the short term, but is amajor negative long term problem for the U.S. Thepersistent balance of payments deficit is the centralissue in the current round of competitive currencydevaluations underway around the world.(WashingtonPost.com, free subscription required)

Shipping & Transportation Sector StrengthBaltic Dry Index BDI (StockCharts.com) HARPEX

(Harper Peterson Container shipping index)Transportation Stocks USDOT Transportation ServicesIndexStatus: Taking a long term view, the USDOTTransportation Services Index (a fairly good leadingeconomic indicator ) is flat, pointing to very weak growth.Shipping rates may have bottomed, but their continuingweakness signals a slow recovery. Container shippingrates covered by the HARPEX more closely related toexpectations of retailers remain below historically-average levels. The Dow Jones Transportation Index(StockCharts.com) had been going up along with therest of the market.About the indicator: Shipping rates and pricing oftransportation industry stocks are much followed andbasically believable long-lead economic indicators. Thereasoning is simple; if a lot of goods are being shippedthen the economy must be improving.The Dow Theory (Wikipedia), for example, one of theoldest and most followed technical indicators is based onthe relative strength of the Dow Jones Industrial Averageversus the Dow Jones Transportation Index. How muchit actually counts is debatable (Mark Hulbert column) .The Baltic Dry Index (Wikipedia) , The Best EconomicIndicator You've Never Heard of tracks the cost ofmoving materials by sea. A higher value indicates risingshipping levels and therefore points to economic

expansion. This Wall Street Journal article and thisBloomberg article (1/10/2011) say that the Baltic DryIndex and most other shipping indexes may give a fuzzyindication of world economic activity this year because ofan unusually large number of new ships this year.

Inflation Rate (Consumer Price Index, Rate ofchange,)Status: Federal Reserve has set an inflation goal ofroughly 2% and at the current 2.3% inflation we are stillnear the goal. Excellent! It is pretty hard to get scaredabout the inflation boogeyman after you see this graph.This is about as low as inflation has been in our

lifetimes.About the indicator: High interest rates whethercaused by inflation or central bank policy tend toprecipitate stock market declines and recessions. Asdiscussed in this Mark Hulbert MarketWatch.com article,(1/18/2011) rates of inflation greater than 4% tend tocoincide with poor market performance. (Chart below isfrom Mark Hulbert article.)
http://www.nytimes.com/2011/02/06/business/06view.html?_r=1&scp=1&sq=shiller&st=csehttp://www.nytimes.com/2011/02/06/business/06view.html?_r=1&scp=1&sq=shiller&st=csehttp://www.marketwatch.com/investing/index/DXY/charts?countryCode=US&submitted=true&intflavor=advanced&origurl=%2Ftools%2Fquotes%2Fintchart.asp&time=20&freq=2&comp=Enter%20Symbol(s)%3A&compidx=aaaaa~0&compind=aaaaa~0&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=1&optstyle=1013http://www.marketwatch.com/investing/index/DXY/charts?countryCode=US&submitted=true&intflavor=advanced&origurl=%2Ftools%2Fquotes%2Fintchart.asp&time=20&freq=2&comp=Enter%20Symbol(s)%3A&compidx=aaaaa~0&compind=aaaaa~0&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=1&optstyle=1013http://stockcharts.com/h-sc/ui?s=$USD&p=D&b=5&g=0&id=p24077287617http://stockcharts.com/h-sc/ui?s=$USD&p=D&b=5&g=0&id=p24077287617http://stockcharts.com/h-sc/ui?s=$USD&p=D&b=5&g=0&id=p24077287617http://www.federalreserve.gov/releases/z1/current/z1r-5.pdfhttp://www.federalreserve.gov/releases/z1/current/z1r-5.pdfhttp://ycharts.com/indicators/total_assets_balance_sheet_of_households_and_nonprofit_organizations_unadjusted#series=type:indicator,id:total_assets_balance_sheet_of_households_and_nonprofit_organizations_unadjusted,calc:&zoom=10&startDate=&endDate=&format=real&recessions=falsehttp://ycharts.com/indicators/total_assets_balance_sheet_of_households_and_nonprofit_organizations_unadjusted#series=type:indicator,id:total_assets_balance_sheet_of_households_and_nonprofit_organizations_unadjusted,calc:&zoom=10&startDate=&endDate=&format=real&recessions=falsehttp://www.research.stlouisfed.org/fred2/series/FYFSDhttp://www.research.stlouisfed.org/fred2/series/FYFSDhttp://research.stlouisfed.org/fred2/series/BOPGSTBhttp://research.stlouisfed.org/fred2/series/BOPGSTBhttp://www.marketwatch.com/story/were-worrying-about-the-wrong-deficit-2011-04-13http://www.marketwatch.com/story/were-worrying-about-the-wrong-deficit-2011-04-13http://www.marketwatch.com/story/were-worrying-about-the-wrong-deficit-2011-04-13http://www.washingtonpost.com/wp-dyn/content/article/2010/10/21/AR2010102100306.htmlhttp://www.washingtonpost.com/wp-dyn/content/article/2010/10/21/AR2010102100306.htmlhttp://www.washingtonpost.com/wp-dyn/content/article/2010/10/21/AR2010102100306.htmlhttp://www.washingtonpost.com/wp-dyn/content/article/2010/10/21/AR2010102100306.htmlhttp://stockcharts.com/h-sc/ui?s=$BDI&p=W&b=5&g=0&id=p83126497019http://stockcharts.com/h-sc/ui?s=$BDI&p=W&b=5&g=0&id=p83126497019http://www.harperpetersen.com/harpex/harpexRH.do?showData=true&period=7&&checkedIndexes=0&floatleft=0&floatright=0&exponleft=0&exponright=0&indicator=0http://www.harperpetersen.com/harpex/harpexRH.do?showData=true&period=7&&checkedIndexes=0&floatleft=0&floatright=0&exponleft=0&exponright=0&indicator=0http://finance.yahoo.com/echarts?s=%5EGSPC+Interactive#chart3:symbol=^gspc;range=5y;compare=unp+csx+ups+^djt;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefinedhttp://www.bts.gov/xml/tsi/src/index.xmlhttp://www.bts.gov/xml/tsi/src/index.xmlhttp://www.bts.gov/xml/tsi/src/index.xmlhttp://www.bts.gov/xml/tsi/src/index.xmlhttp://www.bts.gov/xml/tsi/src/index.xmlhttp://www.bts.gov/publications/bts_transportation_trends_in_focus/2009_09_01/html/entire.htmlhttp://www.bts.gov/publications/bts_transportation_trends_in_focus/2009_09_01/html/entire.htmlhttp://www.bts.gov/publications/bts_transportation_trends_in_focus/2009_09_01/html/entire.htmlhttp://www.bts.gov/publications/bts_transportation_trends_in_focus/2009_09_01/html/entire.htmlhttp://www.harperpetersen.com/harpex/harpexRH.do?showData=true&period=7&&checkedIndexes=0&floatleft=0&floatright=0&exponleft=0&exponright=0&indicator=0http://www.harperpetersen.com/harpex/harpexRH.do?showData=true&period=7&&checkedIndexes=0&floatleft=0&floatright=0&exponleft=0&exponright=0&indicator=0http://www.harperpetersen.com/harpex/harpexRH.do?showData=true&period=7&&checkedIndexes=0&floatleft=0&floatright=0&exponleft=0&exponright=0&indicator=0http://stockcharts.com/h-sc/ui?s=$TRAN&p=W&b=5&g=0&id=p67301153609http://en.wikipedia.org/wiki/Dow_theoryhttp://en.wikipedia.org/wiki/Dow_theoryhttp://en.wikipedia.org/wiki/Dow_theoryhttp://www.marketwatch.com/story/true-meaning-of-dow-transports-weakness-2012-09-25?link=home_carouselhttp://www.marketwatch.com/story/true-meaning-of-dow-transports-weakness-2012-09-25?link=home_carouselhttp://www.marketwatch.com/story/true-meaning-of-dow-transports-weakness-2012-09-25?link=home_carouselhttp://en.wikipedia.org/wiki/Baltic_Dry_Indexhttp://en.wikipedia.org/wiki/Baltic_Dry_Indexhttp://en.wikipedia.org/wiki/Baltic_Dry_Indexhttp://www.slate.com/id/2090303/http://www.slate.com/id/2090303/http://www.slate.com/id/2090303/http://www.slate.com/id/2090303/http://finance.yahoo.com/banking-budgeting/article/108953/baltic-drying-up-as-a-gaugehttp://finance.yahoo.com/banking-budgeting/article/108953/baltic-drying-up-as-a-gaugehttp://finance.yahoo.com/banking-budgeting/article/108953/baltic-drying-up-as-a-gaugehttp://www.bloomberg.com/news/2011-01-10/freight-rates-poised-to-tumble-as-35-mile-line-of-ships-passes-coal-demand.htmlhttp://www.bloomberg.com/news/2011-01-10/freight-rates-poised-to-tumble-as-35-mile-line-of-ships-passes-coal-demand.htmlhttp://www.bloomberg.com/news/2011-01-10/freight-rates-poised-to-tumble-as-35-mile-line-of-ships-passes-coal-demand.htmlhttp://www.bloomberg.com/news/2011-01-10/freight-rates-poised-to-tumble-as-35-mile-line-of-ships-passes-coal-demand.htmlhttp://research.stlouisfed.org/fred2/graph/?chart_type=line&s%5b1%5d%5bid%5d=CPILFENS&s%5b1%5d%5btransformation%5d=pc1http://research.stlouisfed.org/fred2/graph/?chart_type=line&s%5b1%5d%5bid%5d=CPILFENS&s%5b1%5d%5btransformation%5d=pc1http://www.marketwatch.com/story/inflation-doesnt-have-to-be-bad-for-stocks-2011-01-18http://www.marketwatch.com/story/inflation-doesnt-have-to-be-bad-for-stocks-2011-01-18http://research.stlouisfed.org/fred2/series/BOPGSTBhttp://www.research.stlouisfed.org/fred2/series/FYFSDhttp://www.marketwatch.com/story/inflation-doesnt-have-to-be-bad-for-stocks-2011-01-18http://research.stlouisfed.org/fred2/graph/?chart_type=line&s%5b1%5d%5bid%5d=CPILFENS&s%5b1%5d%5btransformation%5d=pc1http://www.bloomberg.com/news/2011-01-10/freight-rates-poised-to-tumble-as-35-mile-line-of-ships-passes-coal-demand.htmlhttp://www.bloomberg.com/news/2011-01-10/freight-rates-poised-to-tumble-as-35-mile-line-of-ships-passes-coal-demand.htmlhttp://finance.yahoo.com/banking-budgeting/article/108953/baltic-drying-up-as-a-gaugehttp://www.slate.com/id/2090303/http://www.slate.com/id/2090303/http://en.wikipedia.org/wiki/Baltic_Dry_Indexhttp://www.marketwatch.com/story/true-meaning-of-dow-transports-weakness-2012-09-25?link=home_carouselhttp://en.wikipedia.org/wiki/Dow_theoryhttp://stockcharts.com/h-sc/ui?s=$TRAN&p=W&b=5&g=0&id=p67301153609http://www.harperpetersen.com/harpex/harpexRH.do?showData=true&period=7&&checkedIndexes=0&floatleft=0&floatright=0&exponleft=0&exponright=0&indicator=0http://www.bts.gov/publications/bts_transportation_trends_in_focus/2009_09_01/html/entire.htmlhttp://www.bts.gov/publications/bts_transportation_trends_in_focus/2009_09_01/html/entire.htmlhttp://www.bts.gov/xml/tsi/src/index.xmlhttp://www.bts.gov/xml/tsi/src/index.xmlhttp://www.bts.gov/xml/tsi/src/index.xmlhttp://www.bts.gov/xml/tsi/src/index.xmlhttp://finance.yahoo.com/echarts?s=%5EGSPC+Interactive#chart3:symbol=^gspc;range=5y;compare=unp+csx+ups+^djt;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefinedhttp://www.harperpetersen.com/harpex/harpexRH.do?showData=true&period=7&&checkedIndexes=0&floatleft=0&floatright=0&exponleft=0&exponright=0&indicator=0http://stockcharts.com/h-sc/ui?s=$BDI&p=W&b=5&g=0&id=p83126497019http://www.washingtonpost.com/wp-dyn/content/article/2010/10/21/AR2010102100306.htmlhttp://www.washingtonpost.com/wp-dyn/content/article/2010/10/21/AR2010102100306.htmlhttp://www.marketwatch.com/story/were-worrying-about-the-wrong-deficit-2011-04-13http://research.stlouisfed.org/fred2/series/BOPGSTBhttp://www.research.stlouisfed.org/fred2/series/FYFSDhttp://ycharts.com/indicators/total_assets_balance_sheet_of_households_and_nonprofit_organizations_unadjusted#series=type:indicator,id:total_assets_balance_sheet_of_households_and_nonprofit_organizations_unadjusted,calc:&zoom=10&startDate=&endDate=&format=real&recessions=falsehttp://www.federalreserve.gov/releases/z1/current/z1r-5.pdfhttp://stockcharts.com/h-sc/ui?s=$USD&p=D&b=5&g=0&id=p24077287617http://www.marketwatch.com/investing/index/DXY/charts?countryCode=US&submitted=true&intflavor=advanced&origurl=%2Ftools%2Fquotes%2Fintchart.asp&time=20&freq=2&comp=Enter%20Symbol(s)%3A&compidx=aaaaa~0&compind=aaaaa~0&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=1&optstyle=1013http://www.nytimes.com/2011/02/06/business/06view.html?_r=1&scp=1&sq=shiller&st=cse


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When trailing 12-monthinflation is...

S&P 500s averagemonthly return since1871 is...

% of months falling intothis category

Below 0 0.61% 28%Between 0% and 1% 0.50% 5%Between 1% and 2% 0.40% 13%Between 2% and 3% 0.96% 15%Between 3% and 4% 0.53% 10%Between 4% and 5% -0.23% 6%

Above 5% -0.05% 22%

Current National Financial Activity Index(CFNAI) (Source: Chicago Federal Reserve)Status: This index is weak. It has hovered around zerofor nearly 2 years now, more evidence of the S econdGreat Contraction. This expects economic growth tostagnate for the next couple of months which, at least,is a lot better than being truly rotten .About the Indicator: The Current National Financial

Activity Index is a weighted measure of total nationalbusiness activity compiled monthly and based on 85economic indicators. Though developed primarily as atool for forecasting inflation, some believe that it is abetter indicator than GDP of short term actual economic

performance.

GDP: Potential GDP vs. Real GDP

(Data link at Federal Reserve )

(Use your viewers magnification/zoom setting to beable to read this graph.

Status: Four years later, inflation-adjusted GDP is just

getting back to where it was in 2007- 2008. It is still wellbelow potential providing room for growth. PotentialGDP has recently been recalculated and scaled down abit, but the gap between actual and potential remains atabout 6% -- much higher than any other historical point.About the indicator: The nonpartisan CongressionalBudget Office maintains a database and econometricmodel of Potential GDP which is the GDP that couldresult if the workforce was fully employed. The graphabove shows both Real GDP and Potential GDP, all inconstant chained 2005 dollars. If you really zoom-in onthe graph you will see that since the late 1940s periodswhere the economy is booming and Real GDP is higherthan Potential GDP tend to end badly the FederalReserve takes away the punch bowl and the party endswith a crashing stock market followed by a recession.Currently the opposite situation exists and the Fed willcontinue to do all that is possible to get the economyperforming better.

Professional Economists Survey of Forecastsfor Inflation, GDP, Unemployment, and Long TermS&P 500 Gains an d Cong. Budget Office EconomicOutlook Status: The 3rd quarter 2013 forecasts by a survey ofprofessional economists are for weak GDP gains (1.9%annual rate for 2013); modest inflation (2% headline for2013); continuing high unemployment (7.3%, animprovement, and only going down to 7.4% by 2014About the indicator: Next release November 25,2013. The Survey of Professional Forecasters is theoldest quarterly survey of macroeconomic forecasts inthe United States. The survey began in 1968 and wasconducted by the American Statistical Association andthe National Bureau of Economic Research. The Federal
http://research.stlouisfed.org/fredgraph.png?g=3LVhttp://research.stlouisfed.org/fredgraph.png?g=3LVhttp://research.stlouisfed.org/fredgraph.png?g=3LVhttp://www.chicagofed.org/webpages/publications/cfnai/index.cfmhttp://www.chicagofed.org/webpages/publications/cfnai/index.cfmhttp://www.chicagofed.org/webpages/publications/cfnai/index.cfmhttp://www.marketwatch.com/story/imprecise-data-skews-economic-view-top-forecaster-2011-06-13?dist=beforebellhttp://www.marketwatch.com/story/imprecise-data-skews-economic-view-top-forecaster-2011-06-13?dist=beforebellhttp://www.marketwatch.com/story/imprecise-data-skews-economic-view-top-forecaster-2011-06-13?dist=beforebellhttp://www.research.stlouisfed.org/fred2/graph/?id=GDPC1http://www.research.stlouisfed.org/fred2/graph/?id=GDPC1http://www.research.stlouisfed.org/fred2/graph/?id=GDPC1http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/http://www.cbo.gov/publication/43539http://www.cbo.gov/publication/43539http://www.cbo.gov/publication/43539http://www.cbo.gov/publication/43539http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/http://www.cbo.gov/publication/43539http://www.cbo.gov/publication/43539http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/http://www.research.stlouisfed.org/fred2/graph/?id=GDPC1http://www.marketwatch.com/story/imprecise-data-skews-economic-view-top-forecaster-2011-06-13?dist=beforebellhttp://www.chicagofed.org/webpages/publications/cfnai/index.cfmhttp://www.chicagofed.org/webpages/publications/cfnai/index.cfmhttp://research.stlouisfed.org/fredgraph.png?g=3LVhttp://research.stlouisfed.org/fredgraph.png?g=3LV


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Reserve Bank of Philadelphia took over the survey in1990.The Survey of Professional Forecasters' web page offersthe actual releases, documentation, mean and medianforecasts of all the respondents as well as the individualresponses from each economist. The individualresponses are kept confidential by using identificationnumbers.

Commodity Research Bureau Index (BarChart.com)Status The CRB Index has been rising good. But, itstill is not up to mid-2011 levels not so good.About the Indicator: If the stuff we use to make thingscosts more, thats probably a good sign that at leastpeople are trying to make things. The CommoditiesResearch Bureau (CRB) Index (Wikipedia description ) represents a market basket of futures prices for majorworld commodities. According to CRB: Thecommodities used are in most cases either rawmaterials or products close to the initial productionstage which, as a result of daily trading in fairly largevolume of standardization qualities, are particularly

sensitive to factors affecting current and futureeconomic forces and conditions. Highly fabricatedcommodities are not included for two reasons: (1) theyembody relatively large fixed costs which fact causesthem to react less quickly to changes in marketconditions; and (2) they are less important as pricedeterminants than the more basic commodities whichare used throughout the producing economy . The CRBIndex measure is further influenced by the fact that itis measured in U.S. Dollars so a fall in the Dollar willautomatically make it appear that world commodityprices have shot up.

Corporate Profits (St. Louis Federal Reserve)Domestic Income) S&P 500 Earnings (data courtesyRobert Shiller, site hosted by Josh Staigne r ) Philadelphia Federal Reserve Survey of ProfessionalForecasters Status: Corporate profits are well above pre-recessionlevels, though still down a bit from late 2011. Liquidassets available for new investment are extremely high.Now that profits have returned, the forecasted annualrates of profit growth are down to normal levels.

About the Indicator: Rising corporate profits is whatstock market investing is all about. The U.S. Departmentof Commerce, Bureau of Economic Analysis posts

quarterly results of U.S. economic performance . Here isa primer on the BEA National Income and Product Account data.
http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/http://www.barchart.com/chart.php?sym=$CRB&t=BAR&size=M&v=0&g=1&p=WO&d=X&qb=1&style=technical&template=http://www.barchart.com/chart.php?sym=$CRB&t=BAR&size=M&v=0&g=1&p=WO&d=X&qb=1&style=technical&template=http://www.crbtrader.com/http://www.crbtrader.com/http://www.crbtrader.com/http://www.crbtrader.com/http://en.wikipedia.org/wiki/Commodity_Research_Bureauhttp://en.wikipedia.org/wiki/Commodity_Research_Bureauhttp://en.wikipedia.org/wiki/Commodity_Research_Bureauhttp://research.stlouisfed.org/fredgraph.png?g=bLNhttp://www.multpl.com/s-p-500-earnings/http://www.multpl.com/s-p-500-earnings/http://www.multpl.com/s-p-500-earnings/http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/data-files/CPROF/http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/data-files/CPROF/http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/data-files/CPROF/http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/data-files/CPROF/http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/data-files/CPROF/http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/data-files/CPROF/http://research.stlouisfed.org/fredgraph.png?g=bLQhttp://research.stlouisfed.org/fredgraph.png?g=bLQhttp://research.stlouisfed.org/fredgraph.png?g=bLQhttp://www.bea.gov/national/pdf/nipa_primer.pdfhttp://www.bea.gov/national/pdf/nipa_primer.pdfhttp://www.bea.gov/national/pdf/nipa_primer.pdfhttp://www.bea.gov/national/pdf/nipa_primer.pdfhttp://www.bea.gov/national/pdf/nipa_primer.pdfhttp://www.bea.gov/national/pdf/nipa_primer.pdfhttp://research.stlouisfed.org/fredgraph.png?g=bLQhttp://research.stlouisfed.org/fredgraph.png?g=bLQhttp://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/data-files/CPROF/http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/data-files/CPROF/http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/data-files/CPROF/http://www.multpl.com/s-p-500-earnings/http://research.stlouisfed.org/fredgraph.png?g=bLNhttp://en.wikipedia.org/wiki/Commodity_Research_Bureauhttp://www.crbtrader.com/http://www.crbtrader.com/http://www.barchart.com/chart.php?sym=$CRB&t=BAR&size=M&v=0&g=1&p=WO&d=X&qb=1&style=technical&template=http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/


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C

For the part-time investor trend following is dangerous you enter the trend too late and miss most of the gains.Then the inevitable crash happens before you can reactin time. Using short term trading indicators is a lot likeplaying a carnival game it looks so simple, butsomehow you always lose. But, if you want to look atwhat is likely for the next couple of months, I like the firsttwo of these indicators best.

NYSE New Highs minus New Lows(StockCharts.com ) Status : Clear sailing.About the indicator: I like this short term indicator ofthe broad stock market as it is really easy to read,changes infrequently, and tends to lead the marketaverages. A bullish signal occurs when the ratio is in anuptrend. Longer term investors will mainly pay attentionto the Weekly view lower on the page

NYSE Hi-Lo Index (StockCharts.com)Status: Overbought.

Consumer versus Cyclical Stocks (StockCharts.com)Status: Rising since mid-2013.About this indicator: In this MSN MoneyCentral article (11/18/2011) Anthony Mirhaydari makes a case thatcyclical stocks beating consumer staples is a sign of abull market and vice versa

Emerging Markets versus Consumer Staples Status: This chart has been negative for years, a sign ofrisk averseness. Often foreign stocks lead the U.S.market. About this indicator: Are investors turning to riskieremerging market stocks, or just hunkering down with oldreliable blue chips?

Stocks versus BondsStatus: Both Daily and Weekly charts are positive.About this Indicator: In theory, over the long haulholding bonds should give about the same yield asholding stocks. This chart shows how a bond fund isfaring against a stock fund.

% Stocks Trading Above 50-Day Average (StockCharts.com) Broader Market (Barchart.com coversapproximately 5,000 stocks) Status: Peaking at 84%?About the indicator: This is a very short term indicatorfor whether the market is overbought or oversold. Theworry point is above 80%. The turn-around point is at

around 20% to 30%.

MACD S&P 500: Moving Index AverageConvergence / Divergence Status: The fast moving average is slightly above theslow average good.About this Indicator: Fidelity Investments has a goodarticle on back- testing various MACD strategies here .

After all is said and done, Im afraid that all of it soundslike both mumbo and jumbo.

Moving averages are plots of the arithmetic orexponential mean of prices for some period of time in the

past. The one shown in the link is the S&P 500, themost commonly followed average for MACD charts. TheMoving Average Convergence Divergence is a plot oftwo moving averages; a slow moving average thatincludes more days than the second fast average. Apositive divergence occurs when the fast average has risen above the level of the slow average

NYSE Daily - Weekly Advance Decline Line(StockCharts.com)Status: Slammed down to an unusually low level normally a contrarian positive indicator.About the indicator: Often market breadth (A simpleratio of how many stocks go up vs. down.) leads actualswings of index prices.These charts are only for traders or for picking anauspicious moment to buy or sell. The initial view of thisshort term indicator is daily Advances-Declines -- Do agood few days follow a bad few days or what? Reset thechart to see a weekly view, again using the line viewType rather than the "candlestick: view. Every few weeksthe market tends to get overextended creating arelatively good time to trade. Buy when the weekly line


Trader Signals - Fast Trader Signals - Slow International View Econometric Models

About This Forecast


Trader Signals Fast (well, relatively fast)
http://stockcharts.com/charts/gallery.html?$NYHLhttps://stockcharts.com/h-sc/ui?s=$NYHILO&p=D&b=5&g=0&id=p78200998853https://stockcharts.com/h-sc/ui?s=$NYHILO&p=D&b=5&g=0&id=p78200998853http://stockcharts.com/h-sc/ui?s=%24CYC:XLP&p=D&b=5&g=0&id=p85973789034http://stockcharts.com/h-sc/ui?s=%24CYC:XLP&p=D&b=5&g=0&id=p85973789034http://money.msn.com/investment-advice/article.aspx?post=9e8bca86-4f70-449d-92e1-3daf7b0837d7http://money.msn.com/investment-advice/article.aspx?post=9e8bca86-4f70-449d-92e1-3daf7b0837d7http://money.msn.com/investment-advice/article.aspx?post=9e8bca86-4f70-449d-92e1-3daf7b0837d7http://stockcharts.com/h-sc/ui?s=EEM:XLP&p=W&b=5&g=0&id=p50223770207http://stockcharts.com/h-sc/ui?s=EEM:XLP&p=W&b=5&g=0&id=p50223770207http://stockcharts.com/h-sc/ui?s=IVV:IEF&p=D&b=5&g=0&id=p04923955819http://stockcharts.com/h-sc/ui?s=$spxa50rhttp://stockcharts.com/h-sc/ui?s=$spxa50rhttp://www.barchart.com/stocks/momentum.phphttp://www.barchart.com/stocks/momentum.phphttp://stockcharts.com/h-sc/ui?s=$SPX&p=W&b=5&g=0&id=p32425078812http://stockcharts.com/h-sc/ui?s=$SPX&p=W&b=5&g=0&id=p32425078812http://stockcharts.com/h-sc/ui?s=$SPX&p=W&b=5&g=0&id=p32425078812https://guidance.fidelity.com/viewpoints/measuring-the-macdhttps://guidance.fidelity.com/viewpoints/measuring-the-macdhttp://stockcharts.com/h-sc/ui?s=$NYAD&p=W&b=5&g=0&id=p65777657866http://stockcharts.com/h-sc/ui?s=$NYAD&p=W&b=5&g=0&id=p65777657866https://guidance.fidelity.com/viewpoints/measuring-the-macdhttp://stockcharts.com/h-sc/ui?s=$SPX&p=W&b=5&g=0&id=p32425078812http://stockcharts.com/h-sc/ui?s=$SPX&p=W&b=5&g=0&id=p32425078812http://www.barchart.com/stocks/momentum.phphttp://stockcharts.com/h-sc/ui?s=$spxa50rhttp://stockcharts.com/h-sc/ui?s=IVV:IEF&p=D&b=5&g=0&id=p04923955819http://stockcharts.com/h-sc/ui?s=EEM:XLP&p=W&b=5&g=0&id=p50223770207http://money.msn.com/investment-advice/article.aspx?post=9e8bca86-4f70-449d-92e1-3daf7b0837d7http://stockcharts.com/h-sc/ui?s=%24CYC:XLP&p=D&b=5&g=0&id=p85973789034https://stockcharts.com/h-sc/ui?s=$NYHILO&p=D&b=5&g=0&id=p78200998853http://stockcharts.com/charts/gallery.html?$NYHL


10/17


has plummeted and starts to rise; sell when it hits adangerous peak and turns down.

VIX - Implied Market Volatility (StockCharts.com.)Status: The fear gage has turned up from an incrediblylow level. The market is way overdue for some badnews. About the indicator: The CBOE (Chicago BoardOptions Exchange) Volatility Index (VIX) measuresmarket expectations of near-term volatility conveyed bystock index option prices. According to the CBOE "sinceits introduction in 1993, VIX has been considered bymany to be the world's premier barometer of investorsentiment and market volatility". When the VIX shoots upyou are in the midst of a crisis - if you didn't know thatalready from the rapidly crashing stock market.In this August, 2011 MarketWatch.com article MarkHulbert describes a very simple VIX strategy: avoid thestock market for the coming month if the VIX reading isabove, say, 20 which he notes is approximately themedian VIX level for the last two decades. Hopefully theVIX signal will come early enough to help avoiddeveloping market crashes. The negative side is that itwill also lead to missing sharp market rebounds. Forexample, following it would have led to missing nearlythe entire market rebound from the crash of the winter of2008-2009. Historically, this VIX strategy performsslightly better than a buy-and-hold strategy.

Viewing Multiple Stock Markets (Click to themaximum time frame view)Status: Is the current downturn just a blip? Emergingmarkets have been the weakest.About the indicator: The Dow-30 and the S&P-500 arewhat most people usually thing of as 'The Stock Market.'Take a look at some of these other long term graphs. Iprefer:

Value Line Arithmetic Index (VAY) (My preferredstock market index.Status: Going strong.About the indicator: Taking a many-year view, thisremarkably consistent index appears to have nearlycaught up with its long term trend -- making the slingshotrebound from the crash of 2008-2009 weaker The ValueLine Arithmetic Average includes the top 1700companies in the U.S. -- all weighted equally. (Similarequal weight ETFs are EWRI and RSP) Historically, thearithmetic index it has had an amazingly consistentgrowth pattern, much steadier than the Dow 30, S&P500, or NASDAQ Composite indices. Because of theequal weighting, portfolio rebalancing is built-in. As aresult, besides being more predictable, the equal weightindex will regularly outperform a conventional index ofthe same stocks. Until recently it was not possible to buyan equal weight EFT, but now a number of equal-weightindex fund ETFs such as EWRI and RSP have beenintroduced. They have only been around a few months,but so far they appear to have very similar tracks to theValue Line Arithmetic Index. Good news!

EEM The MSCI Emerging Markets Fund representsvaluations of the developing markets that have thegreatest potential for growth. Emerging markets havebeen at a plateau since early 2010. Profits need to grow,but this average still is well below trend. A new equalweight emerging market ETF is EWEM .
http://stockcharts.com/h-sc/ui?s=$VIX&p=W&b=5&g=0&id=p96397516333http://stockcharts.com/h-sc/ui?s=$VIX&p=W&b=5&g=0&id=p96397516333http://www.marketwatch.com/story/using-the-vix-to-spike-august-returns-2011-08-01http://www.marketwatch.com/story/using-the-vix-to-spike-august-returns-2011-08-01http://www.marketwatch.com/story/using-the-vix-to-spike-august-returns-2011-08-01http://finance.yahoo.com/echarts?s=%5eVAY#chart1:symbol=^vay;range=1y;compare=eem+^dji+îxic+^gspc;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefinedhttp://finance.yahoo.com/echarts?s=%5eVAY#chart1:symbol=^vay;range=1y;compare=eem+^dji+îxic+^gspc;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefinedhttp://finance.yahoo.com/echarts?s=%5eDJU#chart1:symbol=^dju;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefinedhttp://finance.yahoo.com/echarts?s=%5eDJU#chart1:symbol=^dju;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefinedhttp://finance.yahoo.com/echarts?s=%5eDJU#chart1:symbol=^dju;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefinedhttp://finance.yahoo.com/echarts?s=%5eGSPC#chart2:symbol=^gspc;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefinedhttp://finance.yahoo.com/echarts?s=%5eGSPC#chart2:symbol=^gspc;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefinedhttp://finance.yahoo.com/echarts?s=%5eGSPC#chart2:symbol=^gspc;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefinedhttp://finance.yahoo.com/echarts?s=%5eVAY#chart1:symbol=^vay;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefinedhttp://www.marketwatch.com/story/equal-weight-etfs-tip-investment-returns-2010-12-19http://www.marketwatch.com/story/equal-weight-etfs-tip-investment-returns-2010-12-19http://www.marketwatch.com/story/equal-weight-etfs-tip-investment-returns-2010-12-19http://www.marketwatch.com/story/equal-weight-etfs-tip-investment-returns-2010-12-19http://finance.yahoo.com/echarts?s=EEM#chart1:symbol=eem;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefinedhttp://finance.yahoo.com/echarts?s=EEM#chart1:symbol=eem;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefinedhttp://stockcharts.com/h-sc/ui?s=EWEM&p=D&b=5&g=0&id=p54634918693http://stockcharts.com/h-sc/ui?s=EWEM&p=D&b=5&g=0&id=p54634918693http://stockcharts.com/h-sc/ui?s=EWEM&p=D&b=5&g=0&id=p54634918693http://stockcharts.com/h-sc/ui?s=EWEM&p=D&b=5&g=0&id=p54634918693http://finance.yahoo.com/echarts?s=EEM#chart1:symbol=eem;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefinedhttp://www.marketwatch.com/story/equal-weight-etfs-tip-investment-returns-2010-12-19http://www.marketwatch.com/story/equal-weight-etfs-tip-investment-returns-2010-12-19http://finance.yahoo.com/echarts?s=%5eVAY#chart1:symbol=^vay;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefinedhttp://finance.yahoo.com/echarts?s=%5eGSPC#chart2:symbol=^gspc;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefinedhttp://finance.yahoo.com/echarts?s=%5eDJU#chart1:symbol=^dju;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefinedhttp://finance.yahoo.com/echarts?s=%5eVAY#chart1:symbol=^vay;range=1y;compare=eem+^dji+îxic+^gspc;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefinedhttp://www.marketwatch.com/story/using-the-vix-to-spike-august-returns-2011-08-01http://stockcharts.com/h-sc/ui?s=$VIX&p=W&b=5&g=0&id=p96397516333


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Several of these slow moving trading indicators mayseem far-fetched, irrational or bizarre. None the less, afew are probably the most helpful market timing tools fora part-time investo r. The old adage of Sell in May leadsthe pack with a documented track record going backseveral hundred years.

The Second Great Contraction (link to This Time isDifferent: Eight Centuries of Financial Folly at

Amazon.com)Status: The U.S. and the rest of the world are only mid-way through the world-wide economic debt collapse thatbegan in 2007 . Typically, economic pains from creditdestruction last much longer than ordinary recessions(Ezra Klein, Washington Post 10/9/2011) . Slow growthis the best that can be expected for years to come . (IMF)About the indicator: Reinhart and Rogoff powerfullydemonstrate in This Time is Different the currenteconomic trauma is more like the Great Depression thanany of the comparatively short-lived recessions thatoccurred since then. The resolution of our Second GreatContraction, as Rogoff calls it, will most probably takeseveral more years. Since borrowing costs will remainabnormally low for years, corporate profits may remainunusually strong despite continuing economic pain

Sell in May Indicator Status: Typically, the period from November throughMay is good for stocks.About the indicator: Here is an update from MarkHulbert on the Halloween Indicator still going strong. Ifyou had to pick just a single stock market timing signal,this old and crazy-seeming one might well be the best.Statistically, performance of stock markets worldwideduring the summer months is not as good as during thewinter. When the market crashes it usually is duringSeptember and October. The summer - winter tradingpattern has been shown to occur in many markets worldwide for the past several hundred years. This MarkHulbert article from MarketWatch.com cites a definitivestudy showing that the pattern has been valid for at least317 years in the U.K. This MarketWatch column by SyHarding summarizes his variant on the approach whichincludes also being invested on holidays. My ownanalyses show that the Sell in May or Halloween effect is greatest when the economy is heading into arecession. On the other hand, when coming out of arecession the effects of a rising economy overpower thesemiannual pattern.

According to a Charles Schwab report (5/14/2012) thereappears to be a distinct split among sectors inseasonality as shown in the table below.

Select to view:Overview

Market Valuation Measures Economic Indicators

Trader Signals - FastTrader Signals SlowInternational ViewEconometric Models

About This Forecast


Trader Signals Slow Moving
http://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691142165http://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691142165http://www.washingtonpost.com/business/financial-crisis-and-stimulus-could-this-time-be-different/2011/10/04/gIQALuwdVL_story.htmlhttp://www.washingtonpost.com/business/financial-crisis-and-stimulus-could-this-time-be-different/2011/10/04/gIQALuwdVL_story.htmlhttp://www.marketwatch.com/story/imf-key-economies-to-be-fragile-for-several-years-2011-10-03?dist=beforebellhttp://www.marketwatch.com/story/imf-key-economies-to-be-fragile-for-several-years-2011-10-03?dist=beforebellhttp://www.marketwatch.com/story/imf-key-economies-to-be-fragile-for-several-years-2011-10-03?dist=beforebellhttp://www.marketwatch.com/story/will-halloween-come-early-this-year-2012-10-05http://www.marketwatch.com/story/will-halloween-come-early-this-year-2012-10-05http://www.marketwatch.com/story/will-halloween-come-early-this-year-2012-10-05http://www.marketwatch.com/story/the-halloween-indicator-kicks-into-gear-2010-10-29http://www.marketwatch.com/story/the-halloween-indicator-kicks-into-gear-2010-10-29http://www.marketwatch.com/story/the-halloween-indicator-kicks-into-gear-2010-10-29http://www.marketwatch.com/news/story/if-you-sold-may-should/story.aspx?guid=%7B0D95807D-0AEF-4EC9-B852-215D5F664605%7Dhttp://www.marketwatch.com/news/story/if-you-sold-may-should/story.aspx?guid=%7B0D95807D-0AEF-4EC9-B852-215D5F664605%7Dhttp://www.marketwatch.com/news/story/if-you-sold-may-should/story.aspx?guid=%7B0D95807D-0AEF-4EC9-B852-215D5F664605%7Dhttp://internet.statestreet.com/industry_insights/investor_confidence_index/ici_overview.htmlhttp://www.marketwatch.com/news/story/if-you-sold-may-should/story.aspx?guid=%7B0D95807D-0AEF-4EC9-B852-215D5F664605%7Dhttp://www.marketwatch.com/news/story/if-you-sold-may-should/story.aspx?guid=%7B0D95807D-0AEF-4EC9-B852-215D5F664605%7Dhttp://www.marketwatch.com/story/the-halloween-indicator-kicks-into-gear-2010-10-29http://www.marketwatch.com/story/will-halloween-come-early-this-year-2012-10-05http://www.marketwatch.com/story/imf-key-economies-to-be-fragile-for-several-years-2011-10-03?dist=beforebellhttp://www.marketwatch.com/story/imf-key-economies-to-be-fragile-for-several-years-2011-10-03?dist=beforebellhttp://www.washingtonpost.com/business/financial-crisis-and-stimulus-could-this-time-be-different/2011/10/04/gIQALuwdVL_story.htmlhttp://www.washingtonpost.com/business/financial-crisis-and-stimulus-could-this-time-be-different/2011/10/04/gIQALuwdVL_story.htmlhttp://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691142165


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Investor Sentiment (AAII Investor Sentiment Guide) (Barrons.com Investor Sentiment page) Status: Some people pay serious attention to theseindicators. I dont. About the Indicator: Investor sentiment tends to be acontrarian indicator. When there are vastly more Bullsthan Bears, it is time to worry! When you have a badsinking feeling in your gut, you probably should be abuyer of stocks. Retail investors follow trends, but theydont lead them. As a result, they are usually late to theparty. When too many people get to any party, the policeusually come to bust it up. Peaks in investor sentimentusually lead the market by a few months. As Brett

Arends, a writer for the Wall Street Journal notes in thisMSN article on Why Market Timing Works our feelingsare terrible guides.

The American Association of Individual Investorspublishes a weekly survey of member sentiment (bullish/ bearish / neutral. According to AAII, the currenthistorical averages are bullish 39% (standard deviationof 10.7 percentage points), neutral 31% (standarddeviation of 9 percentage points) and bearish 30%(standard deviation of 10 percentage points). Thisarticle at the AAII website covers a statistical analysisthat verifies the sentiment survey as a solid contrarianindicator: danger lies ahead if investors get too bullish.

Year of the Preidential Election CycleMarketWatch.com) Status: Typically year 2 of the presidential cycle yieldsweak gains.About the Indicator: According to Mark Hulbert'sstatistical calculations of the Dow Jones Industrials since1896 there is statistical validity at the 95% confidencelevel that year 3 of the presidential election cycle yieldsoutsize gains. Year 4 should also produce some gains.Year 2 typically yields nearly zero. Year 1 has typicallybeen sub-par --- clearly not the case this past year.

Stock Market Slow Moving Average (StockCharts.com 12 month SP-500 moving average)Status: The market looks like it is a bit too high at themoment.About the indicator: In my analysis, the movingaverage indicator had a poor track record for my favoritemarket average, the Value Line Arithmetic AverageIndex, in the years between 1985 and 2010 it wasusually better to bet against the long term movingaverage indicator! Since 1985 at my 6-month decisionpoints (October and May) where the Index price wasBELOW the 200-day moving average the average gainswere 9% in the next six months versus only 6% gainswhen Index value was ABOVE the moving average. Atthose times when the Index was below its 200-daymoving average it was right 2 out of 7 times not verygood. My conclusion: Most of the time (80%) this

indicator gives a positive reading which has littlepredictive value, but in the few instances when the Indexis significantly below the moving average, a marketpanic is probably in full swing and you should be startingto think about buying again! Mark Hulbert seems toagree that this indicator now fails to work.

% Stocks Trading Above 200-Day MovingAverage (stockcharts.com covers S&P-500 stock)

Status: The S&P 500 is 84%, sitting on the Wall ofWorry.About the indicator: As a general rule, when a stock's

price is above its 200-day moving average, the stock hasbeen in a long-term price rise. So, an increasingpercentage of stocks priced above their 200-day movingaverage is generally a good sign. However, when 80%to 90% of stocks are trading above their averages it isusually a signal that euphoria has gotten out of hand anda market correction is due. Similarly, when only 20% to30% of stocks are trading above average, a sharp bullishupswing becomes very likely.

NYSE Advance-Decline Line (cumulative)(InvestmentTools.com))Status: Still points up. Good. About the indicator: The indicator is a cumulative countof advances on the NYSE minus declines since 1996.Click to the 5-year view. This good MID-TERM indicatortends to form a rounded top before falling as part of abroad Bear Market

:
http://www.aaii.com/sentimentsurvey/sent_resultshttp://www.aaii.com/sentimentsurvey/sent_resultshttp://www.aaii.com/sentimentsurvey/sent_resultshttp://www.aaii.com/sentimentsurvey/sent_resultshttp://www.aaii.com/sentimentsurvey/sent_resultshttp://online.barrons.com/public/page/9_0210-investorsentimentreadings.htmlhttp://online.barrons.com/public/page/9_0210-investorsentimentreadings.htmlhttp://online.barrons.com/public/page/9_0210-investorsentimentreadings.htmlhttp://online.barrons.com/public/page/9_0210-investorsentimentreadings.htmlhttp://online.barrons.com/public/page/9_0210-investorsentimentreadings.htmlhttp://online.barrons.com/public/page/9_0210-investorsentimentreadings.htmlhttp://online.barrons.com/public/page/9_0210-investorsentimentreadings.htmlhttp://articles.moneycentral.msn.com/learn-how-to-invest/why-timing-the-market-works.aspxhttp://articles.moneycentral.msn.com/learn-how-to-invest/why-timing-the-market-works.aspxhttp://articles.moneycentral.msn.com/learn-how-to-invest/why-timing-the-market-works.aspxhttp://articles.moneycentral.msn.com/learn-how-to-invest/why-timing-the-market-works.aspxhttp://articles.moneycentral.msn.com/learn-how-to-invest/why-timing-the-market-works.aspxhttp://www.aaii.com/sentimentsurvey/sent_resultshttp://www.aaii.com/sentimentsurvey/sent_resultshttp://www.aaii.com/journal/sentimentsurveyarticlehttp://www.aaii.com/journal/sentimentsurveyarticlehttp://www.aaii.com/journal/sentimentsurveyarticlehttp://www.aaii.com/journal/sentimentsurveyarticlehttp://www.marketwatch.com/story/what-2012-election-means-for-stocks-2011-10-21?link=home_carouselhttp://www.marketwatch.com/story/what-2012-election-means-for-stocks-2011-10-21?link=home_carouselhttp://www.marketwatch.com/story/what-2012-election-means-for-stocks-2011-10-21?link=home_carouselhttp://www.marketwatch.com/story/looking-to-year-3-of-presidential-cycle-2010-08-06http://www.marketwatch.com/story/looking-to-year-3-of-presidential-cycle-2010-08-06http://www.marketwatch.com/story/looking-to-year-3-of-presidential-cycle-2010-08-06http://www.marketwatch.com/story/looking-to-year-3-of-presidential-cycle-2010-08-06http://stockcharts.com/h-sc/ui?s=$SPX&p=D&b=5&g=0&id=p09882135179http://stockcharts.com/h-sc/ui?s=$SPX&p=D&b=5&g=0&id=p09882135179http://www.marketwatch.com/story/how-to-know-when-its-time-to-leave-the-party-2013-02-19http://www.marketwatch.com/story/how-to-know-when-its-time-to-leave-the-party-2013-02-19http://stockcharts.com/h-sc/ui?s=$OEXA200R&p=W&b=5&g=0&id=p05951103637http://stockcharts.com/h-sc/ui?s=$OEXA200R&p=W&b=5&g=0&id=p05951103637http://stockcharts.com/h-sc/ui?s=$OEXA200R&p=W&b=5&g=0&id=p05951103637http://www.investmenttools.com/equities/dailybreath/nyse_cumulative_daily_breadth__adl_.htmhttp://www.investmenttools.com/equities/dailybreath/nyse_cumulative_daily_breadth__adl_.htmhttp://www.investmenttools.com/equities/dailybreath/nyse_cumulative_daily_breadth__adl_.htmhttp://www.investmenttools.com/equities/dailybreath/nyse_cumulative_daily_breadth__adl_.htmhttp://www.investmenttools.com/equities/dailybreath/nyse_cumulative_daily_breadth__adl_.htmhttp://stockcharts.com/h-sc/ui?s=$OEXA200R&p=W&b=5&g=0&id=p05951103637http://stockcharts.com/h-sc/ui?s=$OEXA200R&p=W&b=5&g=0&id=p05951103637http://www.marketwatch.com/story/how-to-know-when-its-time-to-leave-the-party-2013-02-19http://stockcharts.com/h-sc/ui?s=$SPX&p=D&b=5&g=0&id=p09882135179http://www.marketwatch.com/story/looking-to-year-3-of-presidential-cycle-2010-08-06http://www.marketwatch.com/story/looking-to-year-3-of-presidential-cycle-2010-08-06http://www.marketwatch.com/story/what-2012-election-means-for-stocks-2011-10-21?link=home_carouselhttp://www.marketwatch.com/story/what-2012-election-means-for-stocks-2011-10-21?link=home_carouselhttp://www.aaii.com/journal/sentimentsurveyarticlehttp://www.aaii.com/journal/sentimentsurveyarticlehttp://www.aaii.com/sentimentsurvey/sent_resultshttp://articles.moneycentral.msn.com/learn-how-to-invest/why-timing-the-market-works.aspxhttp://articles.moneycentral.msn.com/learn-how-to-invest/why-timing-the-market-works.aspxhttp://online.barrons.com/public/page/9_0210-investorsentimentreadings.htmlhttp://www.aaii.com/sentimentsurvey/sent_results


13/17


Organization for Economic Cooperation andDevelopment . Status: OECD predicts spotty world-wide economicgrowth with mild recessions for most of Europe. Theindex for the U.S. is flat.About the indicator: There are many reasons to take

international comparisons with a heaping tablespoon ofsalt I can speak from personal experience havingprepared some international statistical publications. Anumber of countries consider economic data to be statesecrets and the data they provide to internationalorganizations may have little to do with reality. None theless, it is worthwhile checking these estimates now andthen. The rates of change are what count.

I.M.F. World Economic Outlook Status: IMF sees a slowing of growth for the next coupleof years: just 1.1% for the U.S., next to nothing forEurope and an uninspiring 4.7% for the globe as awhole. This is a disappointment.About the indicator: All you have ever read aboutWorld growth trends becomes clear in this customizablechart from the International Monetary Fund. Going backto 1980 you can see the development of major regionsof the world and projections for the future -- all inconstant currency units. (The zoom feature is super!

Also, at the very bottom of the chart the button "PlayTime" runs an animated history of world growthpatterns.) The 'take home' from this chart is that for thepast several decades the rest of the world has beenplaying catch up with the developed economies. As aresult, other economies have consistently been growingat faster rates than ours. For an investor growth RATE iswhat counts.

Sovereign Public Debt Ratio (Wikipedia)Status: U.S. debt equals 107% of GDP and is climbingfast. This if well above the world average.About the indicator: This chart ranks nations by theirDebt-to-GDP ratios. The worst off states serve as bellweathers for the others. CIA raw data

U.S. Versus International Focus (Click to the 5 yearview.)Status: For the past year emerging markets havesignificantly lagged the U.S. Emerging market long termGDP growth rates are again far ahead of the U.S. andother developed countries.About the indicator: The link is to a plot of U.S. stocks(the SP-500 index) versus a few emerging marketfavorite ETFs.

Select to view:OverviewMarket Valuation Measures Economic Indicators


About This Forecast


International View
http://stats.oecd.org/Index.aspx?DatasetCode=MEI_CLIhttp://stats.oecd.org/Index.aspx?DatasetCode=MEI_CLIhttp://stats.oecd.org/Index.aspx?DatasetCode=MEI_CLIhttp://www.imf.org/external/datamapper/index.phphttp://www.imf.org/external/datamapper/index.phphttp://en.wikipedia.org/wiki/List_of_countries_by_public_debthttp://en.wikipedia.org/wiki/List_of_countries_by_public_debthttps://www.cia.gov/library/publications/the-world-factbook/rankorder/2186rank.htmlhttps://www.cia.gov/library/publications/the-world-factbook/rankorder/2186rank.htmlhttp://finance.yahoo.com/echarts?s=FXI#chart1:symbol=fxi;range=my;compare=vde+ewz+spy;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefinedhttp://finance.yahoo.com/echarts?s=FXI#chart1:symbol=fxi;range=my;compare=vde+ewz+spy;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefinedhttp://www.investmenttools.com/equities/weekly/weekly_nyse_new_highs_and_new_lows.htmhttp://finance.yahoo.com/echarts?s=FXI#chart1:symbol=fxi;range=my;compare=vde+ewz+spy;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefinedhttps://www.cia.gov/library/publications/the-world-factbook/rankorder/2186rank.htmlhttp://en.wikipedia.org/wiki/List_of_countries_by_public_debthttp://www.imf.org/external/datamapper/index.phphttp://stats.oecd.org/Index.aspx?DatasetCode=MEI_CLIhttp://stats.oecd.org/Index.aspx?DatasetCode=MEI_CLI


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Tom Ts Stock Market Forecast

Countless stock market forecasts are posted by groupsand individuals, but there is seldom much performanceevidence given to back their credibility. Some forecastsmay be no more than hunches, or downright wacky likethose based on astrology. Other forecasts actually maybe brilliant, but no track record is provided, making itimpossible to judge their probable worth. A fewforecasts, however, do have enough of an experiencebasis so that they deserve some believability. Please

tell me if you find other candidates.

My stock market models, based on forecastingthe Value Line Arithmetic Index, are projecting near-average market performance in the 6 monthsthrough April, 2014.

Probable 6 month m arket ga in : 5% to 6%Probabil i ty o f a t least breaking even: 73%Probabi l ity o f an 8% d ip a long the way: 9%.

These econometric models of the stock market arebased on forecasting the Value Line Arithmetic Average

which tracks the 1700 largest U.S. companies andaccounts for 95% of U.S. industry. Each stock isweighted equally, unlike the market capitalizationweighting of the S&P500 or the price based weighting ofthe Dow Jones Industrial Average.

Here are the models longer term performance results. In real world testing, the models appear to point to thebasic direction of U.S. stock markets most of the time --which is their purpose..

Value Line Dow Jones Annual Forecast Status: The 12/28/2012 issue of Value Line forecast a6.8% increase in the average price of the Dow during

2013 versus the average of 2012. As of 10/25/2013 theDJIA has had a year to date gain of 16%. Ttheir forecastis based on business numbers that have a strongtendency to revert to the mean Value Lines modeltoday would probably see a bleak outlook for the near-term market. That agrees with their current relatively dim(40%) assessment of 3-5 year prospects for stock priceappreciation. About the Indicator : At the close of every year since1980, the Value Line Investment Survey has published a

forecast for the Dow Jones Industrial Average for thecoming year. The model, originally created by SamuelEisenstadt, is a straight-forward statistical model with

just 4 variables for the combined 30 Dow stocks: currentDJ-30 price, earnings per share, dividends per share,and Treasury bond yields. In each case the values usedare Value Lines staff forecasts of changes for thecoming year. The forecasting results of this model havebeen impressive as discussed in this 2006 researchpaper. VL notes that considerable deviation from their

forecast over the course of a year is to be expected.

Sam Eisenstadt Current Model Status : A July 16 Mark Hulbert update says this modelforecasts t 1,640 on December 31. The S&P index on10/25 was hit 1,756, about 7% above the forecast. About the Indicator : Eisenstadt created the Value Linemodel (above) but has maintained this personal modelsince leaving Value Line. The model has an R-squaredvalue of .36 it predicts somewhat less than half of the6-month variation in the S&P 500 Index. That isexcellent.

VectorGrader.com Primary Market Model Status: Fairly neutral. This is a new indicator to me andI think I like it. Currently it points to being 66% invested(declining) with the overall rating being neutral.Momentum seems to be the greatest positive factor andvaluation is a strong negative.About the Indicator : VectorGrader.com has a rathercomplete description of their model at this page.




Econometric Models
http://faculty.smu.edu/tfomby/ValueLine_v2_1.pdfhttp://faculty.smu.edu/tfomby/ValueLine_v2_1.pdfhttp://faculty.smu.edu/tfomby/ValueLine_v2_1.pdfhttp://www.marketwatch.com/story/the-sp-500-will-be-at-1640-at-years-end-2013-07-16http://www.marketwatch.com/story/the-sp-500-will-be-at-1640-at-years-end-2013-07-16http://www.vectorgrader.com/strats/market-modelhttp://www.vectorgrader.com/strats/market-modelhttp://www.vectorgrader.com/strats/market-modelhttp://www.vectorgrader.com/strats/market-modelhttp://www.vectorgrader.com/strats/market-modelhttp://www.vectorgrader.com/strats/market-modelhttp://www.vectorgrader.com/strats/market-modelhttp://www.marketwatch.com/story/the-sp-500-will-be-at-1640-at-years-end-2013-07-16http://faculty.smu.edu/tfomby/ValueLine_v2_1.pdf


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m Ts Stock Market ForecastSince 2007 I have been testing in real time -- basiceconometric models of the stock market. The modelsgive a simplified view of how stocks behave based on afew key economic statistics. This document is my way oftracking the performance of my models hopefully whilekeeping my eyes open to other factors related to themarket. So far, results have been encouraging, but itwould be dangerous to put too much trust in any singlestock market tool.

This document is not intended as investment advice. Ihave no idea whatsoever of what is best for yourparticular circumstances. I want to thank the authors ofall of the resources that I have linked to.

Documents

TomT Stock Market Model 2013-10-28