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Ticker Sense is managed by Kevin Pleines, an equity market analyst at Birinyi Associates. Posts and articles are added by Kevin and the other analysts and traders at Birinyi Associates. Birinyi research and commentary is regularly featured by the New York Times, Wall Street Journal, Financial... More
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  • Storm of Economic Indicators Leaves Markets Unsettled 0 comments
    Sep 8, 2010 11:19 AM
     Clearly today's market is a trader's market.  As they jump from data point to data point the market continues to show elevated volatility with an amazing ability to change direction and buck trends.  Just days ago the press was touting August as the worst in years, but that entire month's decline has been erased over the last three days.  

    One of the drivers of the increased volatility is an increase in the number of data points.  In economists' effort to digest and understand the subject of their study they have added new measures and techniques.  The chart below shows the number of important economic data points per month, beginning in 1996.  As shown, that number has more than doubled in just the last ten years.  On a daily basis we are bombarded by an average of five indicators, many of which are overlapping or redundant and frequently contradictory.  There are no fewer than three distinct consumer confidence measures; at least ten tell us about housing; six measures of employment; and many gauges of economic growth.  Additionally, these examples are only the ones that pertain to the US economy; today's market moves because of reports ranging from Chinese GDP to expected German exports to Greek debt. (In December, 1975 there were five economic indicators for the entire month.) 

    Increasingly we are finding that the market's view shifts abruptly after economic data.  Today for example, the market opened strongly after a better than expected non-farm payroll report only to sell off at 10:00 after a weaker than expected ISM report.


     

    Economic indicator storm 
     

    While the increased number of economic indicators is not necessarily a bad thing for the market or the economy; it is important to note the impact on market psychology.  The most obvious of those changes is the fact that the traditional form of long-term investing does not work and nimble traders who can quickly reverse their views and positions will prosper.



    Disclosure: No positions
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