What General Business Conditions Tell You About the Market
Feb 17th, 2009 | By Charles Delvalle | Category: Chart of the DayIt doesn’t take a rocket scientist to figure out that if business conditions are deteriorating, then the economy must be weakening.
Source: Federal Reserve Bank of New York
One of the big news items today was the New York Manufacturing Index which took another slide for the month of February.
Taking a look at the chart above (which tracks business conditions since 2002) shows that this recession is already much worse than the previous one.
It also looks like conditions still have not peaked. In other words, the worst may be yet to come.
It doesn’t take a rocket scientist to figure out that if business conditions are deteriorating, then the economy must be weakening. After all, when business deteriorates we see layoffs, bankruptcies, cost-cutting plans, you name it.
But how much worse can conditions get? It’s tough to say because this index does not span back to any of our worst recessions. But there has been nothing economically to make us believe that business conditions have improved.
In fact, I don’t expect them to improve until the $700 billion + stimulus bill starts getting spent. At that point, any improvement will be manufactured and temporary.
A good way to play this inevitable outcome is by shorting shares of the Diamonds ETF (NYSE:DIA) which tracks the Dow Jones.
As General Business Conditions deteriorate, the DIA should see much lower prices..
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Charles Delvalle is a self-taught market-timing professional and value analyst who's followed and invested in the market for the past ten years. He uses a unique combination of technical and fundamental research to pinpoint rapid profit opportunities with stocks and options.
Charles is also a staunch contrarian and takes pride in finding undervalued sectors and discovering undervalued, cash-rich companies. He frequently mocks government stupidities and points out the "inaccuracies (or lies, take your pick) that government reporting frequently dispels as "truth".
