Posts filed under “Contrary Indicators”

Economist Cover: The Great American Slowdown

One of the things that people get wrong all the time is the contra meanings of magazine covers. This is a subject we have discussed for quite some time around here.

The assumption is that if something shows up on a mag cover, whatever the subject is must therefore be all over, hence, its time to go the other way. This is a fundamental misunderstanding of what the cover indicator is all about.

The short version is that when a long running trend, well represented by consensus opinion and stock prices, finally bubbles up to the front of a major magazine cover, THATS WHEN its very very late in the cycle. Hence, it is a contrary indicator.

A recent classic cover was the Time Magazine on Housing back in the summer of 2005. The timing was near perfect, as Housing peaked in August  ’05.  However, when something is relatively new, such as the US economic slowdown (see Economist cover below), it is not a true contrary indicator.

Let’s compare these two examples:

Housing Boom
- Lasted almost 10 years
- Home prices increased 2 and 3 standard deviations from historical means
- Homebuilder stocks ran 500% to all time highs

US Economic Slowdown
- (Un)Offically going on for less than 6 months; GDP still positive
- S&P 500 and Dow Industrials made all time highs six months ago
- Equities still within 10-15% of highs
- No consensus for a recession

When we compare these two quantitatively, the differences are pretty obvious as to which one is the true contrary indicator . . .




The Magazine Cover Indicator
Big Picture Overview

uh-oh: Time Magazine on Housing

The great American slowdown
Apr 10th 2008
The Economist print edition

Category: Contrary Indicators, Economy, Financial Press

Contrary Indicator: Page Views Skyrocket!

Category: Contrary Indicators, Markets, Trading, Weblogs

Barrons Review: Is the Magic back at Disney?

Category: Contrary Indicators, Corporate Management, Financial Press, Quantitative, Technical Analysis, Valuation

Economists: 49% Chance of Recession

Category: Contrary Indicators, Economy, Psychology

All Me, All the Time:

Category: Contrary Indicators, Financial Press, Media

Blog Traffic as a Contrary Market Indicator

Category: Contrary Indicators, Markets, Psychology, Technical Analysis, Weblogs

NYSE % of stocks > than 200 Week Moving Average

Category: Contrary Indicators, Markets, Psychology, Trading

Traffic Spike, part II: Google Trend

Category: Contrary Indicators, Markets, Psychology

Traffic Spike?

Category: Contrary Indicators, Markets, Psychology, Weblogs

Fox Business Channel Market Top ?

Category: Contrary Indicators, Financial Press