RECESSION WATCH
The Conference Board Leading Economic Index® (LEI) for the U.S. was Unchanged in November
The Conference Board Leading Economic Index® (LEI)for theU.S. was unchanged in November, remaining at 111.6 (2016 = 100), following a 0.2 percent decline in both October and September.
“The US LEI was unchanged in November after three consecutive monthly declines. Strength in residential construction, financial markets, and consumers’ outlook offset weakness in manufacturing and labor markets,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. (…)
Advisor Perspectives has the important charts:
The 6-m m.a. of the 6-m change is flashing yellow, but December’s LEI would need to drop 1.0% for the 6m-6m to dip below zero.
The 12m-12m is also not about to get negative. It needs to decline below 109 by April:
Scott Minerd, Global CIO at Guggenheim Partners, asserts that “every US recession has been preceded by 3 negative months of LEI. Since #LEI began in 1959, 3 consecutive monthly declines have resulted in a #recession within 6 months 7 out of 11 times…Three consecutive declines are a necessary but insufficient condition, but 4 negative prints will seal the deal.”
Well, we got the 3 negative months between August and October but November was unchanged! Now what?
To be watched:
U.S. Home Sales Pick Up in Second Half of Year Tight supply of homes, especially on the cheaper end of the market, continues to be a limiting factor
Existing-home sales were up 2.7% in November from a year earlier, the fifth straight month of year-over-year gains, the National Association of Realtors said Thursday.
While home sales were down 1.7% compared with October at a seasonally adjusted annual rate of 5.35 million, economists said there are fresh signs that buyers are becoming more confident after a lethargic first half of the year. Sales sputtered through most of the spring selling season, when activity is normally high, falling annually every month until the summer.
Now, historically low mortgage interest rates and an increase in millennials looking to buy their first home are luring more buyers into the market. Millennials account for nearly half of home-purchase mortgage originations, according to data from Realtor.com. (..)
Limited housing stock has contributed to higher home prices this year, with the median sales price for an existing home in November up 5.4% on year at $271,300. (…)
Sales of homes priced at $250,000 and below declined in November from a year ago, while sales of those in the $500,000-to-$750,000 range posted the strongest gains, rising 8.0%. (…)
Housing related charts from Haver Analytics and The Daily Shot:
SENTIMENT WATCH
Back to bullish (bearish?) via The Daily Shot:
SentimenTrader says that it has been 41 weeks since more than two thirds of investors said they were optimistic, one of the longest streaks in the last 30 years. “After the ends of other long streaks with subdued sentiment, the S&P 500 most often carried higher over the next week, but then ran into some issues. Over the next 2-3 months, its returns suffered. They were not only below random, but the median was negative, and the risk/reward was poor. Granted, many of those negative returns were prior to the last decade, but even over the past 5 years, the 3-month returns were not great.”
From CMG Wealth’s Steve Blumenthal:
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NDR Crowd Sentiment Poll: Extreme Optimism (S/T Bearish for Equities).
The current weekly sentiment reading is 68.8. It was 65.3 last week. The current regime is highlighted in yellow.
NDR measured 92 incidences of Crowd Sentiment extremes since 1996. There have been 92 extremes since 1996. The crowd was right just one time and wrong 91 times. Had one followed the crowd at the time at those extremes, one would have lost over 12,000 S&P 500 points (according to NDR). The last Extreme Pessimistic was reached on December 24, 2018 and the last Extreme Optimistic was reached in early April 2019.
It is important to note, the most attractive Extreme Pessimism buy signals have historically occurred with readings below 47. The most attractive sell signals have historically occurred with readings above 70. Call them super extreme “extremes.” These are the most important levels I am keeping my eye on when it comes to investor sentiment.
Source: Ned Davis Research
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NDR Daily Trading Sentiment Composite: Extreme Optimism (S/T Bearish for Equities).
Current regime is highlighted in yellow below.
- Current daily sentiment reading is 73.33. It was 55.56 last week.
- Buying opportunities occur at “Extreme Pessimism” readings below 41.5. Selling/trading opportunities occur at “Extreme Optimism” readings above 62.5.
- Note: The most attractive buying opportunities have historically occurred with readings below 25 (faded red arrow). While the strongest sell signals have occurred with readings above 75.
Source: Ned Davis Research
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13/34–Week EMA Trend Chart:
At yesterday’s close:
