Sunday, July 26, 2015

Economic Activity Composite

If the Fed is going to use the pretense of economic strength to raise rates, it shouldn't procrastinate or risks losing face to a business cycle proclaimed manageable or dead by many. The invisible hand, the true driver of the business cycle and global economic 'policy', has already begun the process.

Business Cycle
Average weekly initial claims (AWIC), one of many inputs that comprises the US Economic Activity Composite (EAC), up ticked through the second week of July. AWIC's (chart 1) and EAC's (chart 2) negative and positive trend oscillators maintain the prosperity (growth phase) within the business cycle.

Prosperity, however, is aging rapidly. A series of lower highs since 2013 (chart 2) and long-term cycle close proximity to extreme concentration (red boxes - chart 3) suggest an aging trend that's leading a transition from prosperity to liquidation (economic contraction). This transition, confirmed by AWIC's upside breakout of the 2009 downtrend and/or sustained negative close of the EAC oscillators, should be widely recognized by the majority in 2016.

Chart 1

Chart 2

Chart 3

Headline: U.S. jobless claims drop to 41-1/2-year low

WASHINGTON (Reuters) - The number of Americans filing new applications for unemployment benefits last week fell to its lowest level in more than 41-1/2 years, suggesting the labor market maintained a solid pace of job growth in July.

The sturdy jobs picture together with a strengthening housing market brings the Federal Reserve a step closer to raising interest rates this year.



Market-driven money flow, trend, and intermarket analysis is provided by an Insights key.