[RUTrading]

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■  40 Year Unemployment Rate compared to the S&P 500 (3:55)

This week I wanted to have deeper dive into some longer term charts, and one area that especially caught my eye was the Unemployment Rate compared to the S&P 500 over time as the Unemployment rate has spiked recently. So, I've marked up long term chart, which shows what has happened during the past four times that it has started trending higher in the past 40 years. What it shows is that in 3 out 4 of the periods when the unemployment rate trended higher. That the stock market didn't bottom for around 18 months, but then recovered back into Stage 2 while the unemployment rate continued higher for a while before topping out and starting to trend lower again. So although only a small amount of data points. It does show a 75% chance of a more major Stage 4 decline from here.

This is only one data point though, as in the Stage Analysis method we use the Weight of Evidence technique to combine what all the various market breadth charts are telling us. But I do think it's an interesting addition to our Weight of Evidence to keep an eye on.

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isatrader, Fasinating work around the Unemployment Figures, enjoyed that insert. Will be watching that with interest going forward.  

[pcabc]

So when I was talking about relative strength it really is comparing difference indices within the NYSE. I personally only follow my local market so can’t point you to real examples of the NYSE and maybe it does not work as I have not tested it. So you can try testing many verities like Mid Cap vs Small Cap, or Small Cap vs Large Cap or Large Cap vs Bonds or Growth vs Value or Stocks vs Gold.

Attached is an example of Small Cap vs Large Cap and you can see how it avoid 2008 and been out for the past 3 years while our market has gone sideways.

During bull markets one will be much stronger. You then have that as one of your many BUY signals to add in your Market Gauge to create your Weight of Evidence and when it is not the stronger one it is a Sell or Neutral signal. Just something you might want to explore.

OK, that what you mean.    The chart you posted, that is the JSE All Share index versus your indicator based on comparing Small versus Large Cap.  What is the criteria you use to determine whether you should be in long or not?  Is it taking the moving average of the relative strength of the two or some other indication?

I've plotted the S&P500 (large cap) and the relative strength of it against the S&P600 (small cap) but over time periods of a couple of years it does not appear to be all that informative?  Perhaps I'm not reading it correctly?  I tried plotting the relative strength against an approximately two year EMA to see if that gave any insights.  I picked this time period as it looked like a longer term chart and it was a first guess.
   

I can see the relative strenght line rising, i.e. the large caps being stronger than the small caps definitely in 2019 and in 2007. but the opposite is true in 2001/2002 where small caps were strongest for a long period except after the bottom was hit.  Also there is a trend for the S&P500 to be stronger in 1997 through 1999 but the market does not top until 2000.  However, perhaps this comparison does not work in this market.  Or perhaps I need to look at this another way?

[RUTrading]

So when I was talking about relative strength it really is comparing difference indices within the NYSE. I personally only follow my local market so can’t point you to real examples of the NYSE and maybe it does not work as I have not tested it. So you can try testing many verities like Mid Cap vs Small Cap, or Small Cap vs Large Cap or Large Cap vs Bonds or Growth vs Value or Stocks vs Gold.

Attached is an example of Small Cap vs Large Cap and you can see how it avoid 2008 and been out for the past 3 years while our market has gone sideways.

During bull markets one will be much stronger. You then have that as one of your many BUY signals to add in your Market Gauge to create your Weight of Evidence and when it is not the stronger one it is a Sell or Neutral signal. Just something you might want to explore.

OK, that what you mean.    The chart you posted, that is the JSE All Share index versus your indicator based on comparing Small versus Large Cap.  What is the criteria you use to determine whether you should be in long or not?  Is it taking the moving average of the relative strength of the two or some other indication?

I've plotted the S&P500 (large cap) and the relative strength of it against the S&P600 (small cap) but over time periods of a couple of years it does not appear to be all that informative?  Perhaps I'm not reading it correctly?  I tried plotting the relative strength against an approximately two year EMA to see if that gave any insights.  I picked this time period as it looked like a longer term chart and it was a first guess.


I can see the relative strenght line rising, i.e. the large caps being stronger than the small caps definitely in 2019 and in 2007. but the opposite is true in 2001/2002 where small caps were strongest for a long period except after the bottom was hit.  Also there is a trend for the S&P500 to be stronger in 1997 through 1999 but the market does not top until 2000.  However, perhaps this comparison does not work in this market.  Or perhaps I need to look at this another way?

It has been a while since I worked on this comparison so will go back and look at the formula's in Metastock. I am not the greatest when it comes to formulas. So even mine probably could be technically wrong, but I will share it with you. 

I need to work on collecting US data and then can contribute more to this forum. You might find that large vs small does not work and may need to look at others indices to compare.

[alphatech]

Great info, I'm enjoying these conversations and learning lot from it. I'm thinking aloud here. Could it be that we are looking at the forest but not in the forest? I see unemployment figure from this graph and all make sense, although I think this is a little different, this time not only people are losing jobs but most of the companies are close or closing. The unemployment figure is only representing workers not businesses. In 1929, there was a combination of both. In 2008 most were workers while companies where still in business. Completely off track here?

[pcabc]

Market breath data, my overview with and without taking the MA of the index into account

Following discussions here I have looked at my overall breadth summary both as is, and also capping the 'overal' score to 'sell' when the index in question has a falling 150 day MA.  With the current recovery the breadth has started looking stronger.  But if we take the slope of the 150 day MA of the index into account things look less rosy in most areas.

Without taking the direction of the 150 day MA of the relevant indices:
   


Taking into account the slope of the 150 day MA of the relevant indices:
   

I had deliberately left this out originally as it gave one parameter very strong influence over the 'weight of evidence'.  However, in stage analysis this is a very prominent indication.  So perhaps it deserves this prominence.

[pcabc]

Market breadth

US:
       

UK:
       

Europe:
   

Oil & Gas, Gold & Silver:
           

[pcabc]

US sectors

           
           
           
   

The most posative sectors are Healthcare, Consumer Staples followed by Technology.  All have flat / slightly rising 150 day MAs with heathcare and Technology being above these MA,s albeit barely for the latter.  For Healthcare and Consumer Staples the percentages of stock about their 50 and 200 day EMAs is strong to the point of being overbought on with the percentages above their 50 day EMAs.

[grbaNT]

Attached are the updated charts of the RABWDB Indicator, Individual Phases, SP500 RABWDB, SP400 RABWDB and SP600 RABWDB.

To learn more about the indicator go to https://dg-swingtrading.blogspot.com/sea...bel/RABWDB