When looking at the Industrial production Index (one of the best forecasters of future recessions) you noticed every top over 50 years, has been marked by a significant angle divergent. @nmike a long time ago introduced me to RSI (50) and how to properly use the indicator. He just recently revisited this topic and I started looking through economic data. What I found was exception results.
To use RSI (50) to scan charts for divergences or support you often compare RSI to price. When you see price (in the case economic data) going up and RSI going down, that is what we call divergence. When you have Price up and RSI down, that usually calls for a top and future pullback. Using RSI with Industrial Production we can call a recession before a recession is underway. Being able to see a large divergence between Economic Data and RSI, we can also assume a major market correction is under way.
Comments
QuantitativeExhaustion
⋅
The aftermath of both the tech bubble and more recent financial-housing bubble bursting has really caused headwinds in % labor force vs (able body) working population. The most common theme behind the 15 year drop in % labor force, is businesses have slowed investment in human labor and have invested more in efficiency in production. What does that mean? Not only are businesses finding locations out of United States with the least cost of production, Technology is taking most of the jobs away and allowing businesses to make more profit.
If we study the chart we can see RSI (50) was signaling that we have a problem before there was a problem.
QuantitativeExhaustion
⋅
Further Illustrating the point of the problem of employment vs production, this chart compares % labor force Industrial Production vs (able body) working population
QuantitativeExhaustion
⋅
Comparing Industrial Production, S&P 500 and RSI (50)
QuantitativeExhaustion
⋅
When posting non anchored lines such as the line angle tool, published charts don't always line up when published. This fixed chart is much better.
cooney_s
⋅
Love it ! Love the stuff you post, keep them coming.
againstthegrain
⋅
storm ahead!
jangseohee
⋅
only dark clouds..
jangseohee
⋅
That's, mind boggling for me :-)
What a fundamental !
QuantitativeExhaustion
⋅
Sure we get to use our indicator and overlay tools with Economic Analysis. I've showed these charts before and it's quickly disregarded.
The aftermath of both the tech bubble and more recent financial-housing bubble bursting has really caused headwinds in % labor force vs (able body) working population. The most common theme behind the 15 year drop in % labor force, is businesses have slowed investment in human labor and have invested more in efficiency in production. What does that mean? Not only are businesses finding locations out of United States with the least cost of production, Technology is taking most of the jobs away and allowing businesses to make more profit.
If we study the chart we can see RSI (50) was signaling that we have a problem before there was a problem.