More Guessing

The guessing continues as data evolves.

Don’t look now, but the BigFoot system flipped a circuit-breaker. We lost the credit macro.

If you’ve been following this saga the last few weeks you’ll know this is a tricky deal because the (St. Louis) Fed changed the way they calculate one of the data points that feeds this signal. This is a little like when the powers that be decided to remove food and energy from the CPI calculation… it changes things. We’ve manually reconstructed the data for the index for now, and the signal did, in fact, go negative.

Here’s where we’re concerned –

  1. the Credit Macro has been quite reliable over time as an indicator of economic health. Typically, if this thing fails (which is rare) this is the real deal… bad stuff typically follows
  2. The overall database of macro indicators actually added net-long positions (albeit only about 1%, so a pretty small number)
  3. Things are moving FAST these days, and government intervention has been swift…

What we’re saying is our typically ‘old faithful’ BigFoot Credit Macro has us watching closely because the government appears to be trying to manipulate things such that we could see a rapid stabilization in credit markets, thus whip-sawing this indicator. Yes, it’s out, but will it stay out?

There are some suggesting we’ve already seen the bottom of this market. Perhaps they’re right. Perhaps not. Since the total number of infected is essentially unknown, we’re in a statistical quandary… which data do we use to build our expectations?

Oh yeah… it’s still guessing.

So, for now, we’ll look at what the market seems to be giving us, which is about a 300 point SPX range between 2350 and 2650 until we get further clarity. Trying to do a lot more technical analysis on this stuff is, as I said, just a guessing game.

As the data changes, we’ll evolve. Until then, the word remains caution. It’s probably too soon to sound the all-clear on this one.

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