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Where Is Economy at in the Economic Cycle?


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#11 Sentient Being

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Posted 29 December 2006 - 01:54 PM

Wrong approach....Market leads the ecnomy by 6 to 9 months.....By the time you read recession in the newspaper it is to late to sell.....


You missed my meaning. I've already loaded the ETF's and Stocks I want to watch for the early economic contraction and am starting to watch them now for openings. And I see one or two I may take a swing at already. My goal is to be in BEFORE everyone else admits we have arrived in a recession. The idea would be to trade the stuff I have a statistical reason to beleive will outperform going forward, as we move toward and into recession. The problem of course is knowing when to buy, the expansion could suprise and last for years yet.

We may be clearly beyond the early recovery stage but are we really in the last third of the recovery? Will it end soon? Is 2007 the year the recession begins?

So if we are still in, or near the end of the last leg of the economic expansion, then now is the time to start looking at what's going to be working in the next phase, before that early contraction phase is acknowledged by all.


The banks are not all-powerful, and deflation/recession/big phase change in the economy certainly isn't impossible, but I'd rather be late than early in getting off the train.

Happy New Year to all, and Sentient Being -- YEAH - BEVERAGES!


Doug


Yeah, my buy and hold is doing better than my trading as the averages keep moving up. How many times this year, last year, the year before have we been told the top is in and the next giant, leg c down was underway? of course, they were wrong, again and again.

I'm in the early stages here of working this out. It seems to me that this expansion is getting old. That I should be looking at things I expect to work better in the coming economic contraction. But I'm wonding if we will get much of a contraction at all at this point. One step at a time.

Edited by Sentient Being, 29 December 2006 - 01:50 PM.

In the end we retain from our studies only that which we practically apply.

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#12 Sentient Being

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Posted 29 December 2006 - 02:07 PM

Another point I wold make about Stovalls work as compared to this idea that the market moves 6 months in advance. I'm not sure that the logical arguement that the market always moves 6 months in advance invalidates the actual market results that Stovall reported on. He published sector and industry performace during each phase of the economic cycle. It wasn't what "SHOULD" happen but what DID happen. So why do these stocks outperform the S&P, AFTER everyone knows we are in the cycle? I don't think I have to understand why certain industries tend to outperform in certain phases of the economic cycle to use that fact to my advantage. I just need to know what cycle I'm in, what cycle is coming, and use the information. Of more interest to me would be knowing exactly where we are at in the cycle.

Edited by Sentient Being, 29 December 2006 - 02:12 PM.

In the end we retain from our studies only that which we practically apply.

~ Johann Wolfgang Von Goethe ~

#13 PorkLoin

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Posted 29 December 2006 - 02:13 PM

Sentient Being: It seems to me that this expansion is getting old. That I should be looking at things I expect to work better in the coming economic contraction. But I'm wonding if we will get much of a contraction at all at this point. One step at a time.


Yeah, that sounds good to me. When we start "looking" for the end of a trend, isn't it really just top-picking? And boy have I picked a lot of tops, with the lack of success one might imagine.

I'm all for watching the stuff we think will benefit or do relatively well in a contraction, but I want the charts to confirm that they are going up or doing better, etc. The charts and the markets should signal us what is going on.

Bearish expectation + no chart confirmation = not too much.


Doug

#14 traderpaul

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Posted 29 December 2006 - 03:30 PM

Another point I wold make about Stovalls work as compared to this idea that the market moves 6 months in advance. I'm not sure that the logical arguement that the market always moves 6 months in advance invalidates the actual market results that Stovall reported on.

He published sector and industry performace during each phase of the economic cycle. It wasn't what "SHOULD" happen but what DID happen. So why do these stocks outperform the S&P, AFTER everyone knows we are in the cycle? I don't think I have to understand why certain industries tend to outperform in certain phases of the economic cycle to use that fact to my advantage. I just need to know what cycle I'm in, what cycle is coming, and use the information.

Of more interest to me would be knowing exactly where we are at in the cycle.

That is exactly my point.....You are using a lagging indicator as a leading indicator.....Use TA instead for timing....
"Inflation is taking place now. Prices may not appear to be rising because they are making packaging smaller. " Rickoshay