When it comes to the market, exchange traded funds (ETFs) and the definition of a recession, are technical indicators worth their salt or are they thrown to the wind?
Gary Gordon for ETF Expert points out the fact that the recent recession did not occur officially until July 2008.
That’s because by the traditional definition of a recession, we would need two consecutive quarters of negative growth. We had it in the third quarter, and it seems inevitable that we’ll have it in the fourth, as well.
But media was talking about the “R” word as early as mid-2007. That could have been tied to “Bush Fatigue” more than hard numbers, though. Either way, Gordon notes that most people accept that we’re in a “common sense” recession as of the end of 2007.
But it makes one wonder: if we’re going by the measures above, what’s the use of technical indicators?
Take the S&P 500 SPDR (SPY), which is down 41.7% for the year, actually showing around a 13.1% reversal from its closing low. Technically speaking, a bull market is a rise in value of the market of 20%. Does that mean we are less than 7% away from the start of a new bull market?
Not likely, as we are months or a year away from a true bottom. The historic volatility in the markets is taking all technical definitions and tossing them aside for now.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.