What Does This Reliable Economic Indicator Say About The Markets And Economy?

Jul. 16, 2018 7:22 PM ETDIA, SPY, VOO, VTI8 Comments23 Likes
Chris Ciovacco profile picture
Chris Ciovacco
9.64K Followers

Summary

  • This indicator peaked over two years before the major stock market peak in 2007.
  • How does it look today?
  • How concerned should we be about the lagging Dow?

Freight Volume Peaked Well Before The Financial Crisis

The Freight Transportation Services Index, calculated by the United States Department of Transportation, peaked in January 2005 or more than two years before the S&P 500's major top in October 2007. After the October 2007 peak in stocks (SPY), the Freight Transportation Services Index dropped sharply as shown in the chart below.

short-takes-ftsi-2005.png

If (a) the economy was on the ropes in 2018 and (b) the January 2018 peak in the S&P 500 was similar to the October 2007 peak, we would expect to see observable weakness in the Freight Transportation Services Index. Instead of weakness, the Freight Transportation Services Index just posted a new high. Compare and contrast the chart above and the chart below.

short-takes-ciovacco-capital-ftsi-2018.png

Freight Has A Good Track Record

According to MarketWatch's Mark Hulbert, freight volume is worth watching:

"Its status as a leading economic indicator rests on a strong statistical foundation... According to research conducted by the Bureau of Transportation Statistics, downward trend changes in the Freight Transportation Services Index have, at least over the past three decades, led economic slowdowns by an average of four to five months. That may not seem like a long lead time, but keep in mind that it’s rare to find indexes that are reliable coincident indicators, much less leading one."

What About The Lagging Dow?

This week's stock market (VOO) video addresses the following questions:

  • How concerned should we be about the Dow's (DIA) lagging performance?
  • How have U.S. stocks performed since steel and aluminum tariffs hit the news wire in early March?
  • The duration of the present day pullback (VTI) is rare and similar to 1984; what happened next in 1984?

This article was written by

Chris Ciovacco profile picture
9.64K Followers
Chris Ciovacco is the founder and CEO of Ciovacco Capital Management (CCM), an independent money management firm serving individual investors nationwide. The thoroughly researched and backtested CCM Market Model answers these important questions: (1) How much should we allocate to risk assets?, (2) How much should we allocate to conservative assets?, (3) What are the most attractive risk assets?, and (4) What are the most attractive conservative assets? Chris is an expert in identifying the best ETFs from a wide variety of asset classes, including stocks, bonds, commodities, and precious metals. The CCM Market Model compares over 130 different ETFs to identify the most attractive risk-reward opportunities. Chris graduated summa cum laude from The Georgia Institute of Technology with a co-operative degree in Industrial and Systems Engineering. Prior to founding Ciovacco Capital Management in 1999, Mr. Ciovacco worked as a Financial Advisor for Morgan Stanley in Atlanta for five years earning a strong reputation for his independent research and high integrity. While at Georgia Tech, he gained valuable experience working as a co-op for IBM (1985-1990). During his time with Morgan Stanley, Chris received extensive training which included extended stays in NYC at the World Trade Center. His areas of expertise include technical analysis and market model development. CCM’s popular weekly technical analysis videos on YouTube have been viewed over 700,000 times. Chris’ years of experience and research led to the creation of the thoroughly backtested CCM Market Model, which serves as the foundation for the management of separate accounts for individuals and businesses. Copy and paste links into your browser: Market Model: http://www.ciovaccocapital.com/sys-tmpl/ccmmarketmodel/ More About CCM: http://www.ciovaccocapital.com/sys-tmpl/aboutus/ YouTube: http://www.youtube.com/user/CiovaccoCapital Twitter: https://twitter.com/CiovaccoCapital CCM Home Page: http://www.ciovaccocapital.com/sys-tmpl/hometwo/
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Disclosure: I am/we are long SPY, VOO, VTI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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