Wednesday, February 24, 2016

Recession Stocks Predict Recession. Who Knew?

EconoDunces can never see recession coming ahead of time because that would confirm they don't know what the fuck they're doing, and they always want that to be a surprise. So instead, they use GDP to predict GDP, locked in their own happy circle jerk...

Fundamental analysts deride technical analysis (charts) as looking in the rear view mirror to predict the future. They prefer to guess where the economy will be a year from now based on where it is today. We have so much to learn. 

We look at charts not to predict what WILL happen, but to ascertain what ALREADY HAS happened. Suffice to say, if you look in the rear view mirror and see blue sky, then the future won't be like the past...

Recession stocks peaked coincident with the past two recessions, and now they are showing extreme relative strength...

Campbell Soup / S&P ratio:

Consumer staples with real GDP:
Blue lines show official start of each recession, as confirmed by GDP...

The other thing we know is that when recession stocks roll over hard, so does the market. This current blow off top in consumer staples aka. rising wedge, is the steepest we've seen.

The odds on scenario is recession and crash at the exact same time. 

Vertical lines show when consumer staples rolled over:

Beyond all asinine

Up 30% since the August low: