Technical Laboratory Update For The Week Of August 14, 2016

We moved marginally higher this week out of our 2155 to 2175 range to a new 2175 to 2185 trading range where we closed essentially in the middle of on Friday.  Last week we covered potential paths for the coming couple of months which we'll revisit and weight at the end of the month once we have entered our turn window via presidential year seasonality along with a coinciding Weekly MSP turn.  Our focus for this edition is a longer view of cycles and their implications.  In the United States we average a recession every 5.5 years.  June marked the seventh year we have been recession free and are rapidly approaching the record set from 1981 to 1991 of ten recessionless years.  There are a few interesting items at play in conjunction with our business cycle becoming rather extended.

U.S. Recessions

U.S. Recessions

First is our exceptionally weak recent GDP numbers and the precedence it sets with regard to historical incidence of the same kind.  Below is the FRED chart with the description of the phenomenon.

FRED Chart

FRED Chart

The next piece is another cycle chart, but not of presidential cycles.  This one covers the 100 years worth of decades and their price behavior as they progress through each year.  You'll notice that year sevens have a history of containing some very nasty declines, think 2007 and 1987.

Decade Cycle Chart

100 Year Decade Cycles

While it is premature and perhaps a bit ambitious to already be looking ahead to 2017 it would also be complacent not to think about what may lie ahead.  This week we saw a chink in the strong growth main stream media narrative with PPI coming in with a negative number which indicates that deflation is rearing its head.  With rates currently only .25% above zero the Federal Reserve is in a tight spot with regards to options to attempt to stoke inflationary pressures without some seriously unorthodox and untested measures.  As the evidence begins to pile up it is beginning to appear as though the incoming newly elected president is going to be tested right from the word 'go'.  Good luck this week and we'll see you on the board.

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