The Keystone Speculator's Philly Fed Recession Indicator; US Slipping Quickly Into RECESSION; Philly Fed Prints 4 Consecutive Down Months

The recession indicator was posted back in late August as Keystone was calling and forecasting the stock market top in real-time; in late September early October 2018, the stock market was toast. It is time to revisit The Keystone Speculator's Philly Fed Recession Indicator now triggering a recession watch approaching faster than anyone realizes (late Q1, Q2, Q3).

The recent manufacturing data is soggy. The numbers are running out of gas. For the Philly Fed, four consecutive downward-trending numbers and/or the 3-month (or 4-month) moving average falling below zero are useful in determining when a recession arrives.

The Philly Fed in December is 9.4 a single-digit midget which triggers a warning bell. The Philly Fed has now dropped for four consecutive months. A recession is coming very fast likely only a few months or less say Q2 and Q3. Interestingly, the universal consensus on Wall Street is that the recession will not begin until 2020 and others say 2021.

The blue line, the Philly Fed numbers, is lowest since 2016. One rule of thumb Keystone uses on recession forecasting is that if four decreasing numbers occur in a row, a recession is likely on the come. The last four readings are 22.9, 22.2, 12.9 and 9.4. Bingo. Watch the number on 1/17/19 next week. It is critical.

Another rule of thumb for the recession watch is using the 3-month MA (or the 4-month MA) for the Philly Fed data. This is shown by the maroon line that prints a lower lower than in recent months. When the moving average turns negative a recession is likely beginning to smack you in the face; it is down to 14.8 and dropping..

Note the trend in the Philly Fed since the peak at 34.4 in May; lower lows and lower highs. When the Philly Fed falls apart it is usually a very fast and sharp drop (which is not occurring as yet). Most young folks (under 30 years old) have not experienced a recession before. All of the lives of young people will change forever when the recession hits. Many will lose their jobs and have no idea what will hit them. Old dudes, like Keystone, have lived through several recession periods over the decades. It will be tough times for a year or two.

When the 3-month MA (or 4-month MA) turns negative, the recession has begun or will within a few short months. Typically, a recession occurs every four to seven years but the Federal Reserve and other global central bankers have destroyed the expected business and economic cycles with their obscene Keynesian spending since March 2009. That is when former Fed Chairman Bernanke, the "Father of Easy Money," began QE1 to protect the wealthy privileged class in America saving the stock market. The end of the decade of central banker largess, that created the nonstop record highs in stocks year after year, may end very abruptly.

Looking back at prior recessions, there was a bad one in the early 1980's, then a milder recession in the early 1990's. The 1990's were aided by the huge technology boom and the advent and common use of the personal computer. This technology revolution pushed any recession to the side until the dotcom bubble burst in March 2000.

In the early 2000's, former Fed Chairman Greenspan pumped the stock market higher to reward his wealthy friends by lowering rates and keeping rates at low levels. This created the housing boom which went bust in 2007-2008 and created the 2008-2009 financial crisis. Fed Chairs Bernanke, Yellen and now Powell kept the stock market party going off the 2009 bottom into the September 2018 top.

The stock market peaked in 1980 dropping into a very nasty recession during 1980-1983. The stock market peaked in the summer of 1990 as the recession began and was in progress. The Philly Fed 3-mth MA went negative months before. Stocks peaked in March 2000 with the recession during 2001-2002. The 3-mth MA crossed negative at the start of 2001. October 2007 was the peak in the stock market ahead of the Great Recession during 2008-2009. The Philly Fed 3-mth MA crossed negative in mid to late 2008.

In 2011-2012, the 3-mth MA went negative but Bernake saved the day when he announced 'QE Infinity' again saving the wealthy class that own large stock portfolios. In late 2015, the Philly Fed 3-mth MA again slips negative. The stock market peaked in May 2015; you long time followers of Keystone remember him calling the exact top in the stock market back then. However, as always, the Fed and other global central bankers stepped in to save the day in early 2016 (the Tweezer Bottom on the candlestick charts) and stocks rally into the September 2018 top.

The stock market typically peaks ahead of when the Philly Fed 3-mth MA slips negative which occurs coincidentally or a couple-few months ahead of when recession begins. Thus, the stock market peaked in September-October 2018 so a few months forward places markets in the February-April time frame.

The Philly Fed number is under 10 approaching zero quickly and the 3-mth MA is below 15 printing new lows and heading down. Remember, when the Philly Fed collapses, it typically occurs very sharp and quick. The recession is likely approaching far faster than anyone realizes.

The Philly Fed is now in a 4-month downtrend and the 3-mth MA may turn negative as early as 2 or 3 months out (February-April). The recession may be here as early as late Q1, or Q2 and probably surely in Q3 this year. This is fascinating since most every Wall Street analyst says a recession is out of the question this year. Boy, they all will be surprised, as well as their clients.

The Wall Street Einstein's will say talk of a recession is preposterous. Well, when some of you are called into the boss's office as this new year begins and over the coming months, and he drop-kicks you across the parking lot into the dumpster, rest assured the recession is underway. Stocks and the economy will head south rapidly and America will be in a malaise for a year or two, say now through 2020.

Watch the Philly Fed closely. Pay attention to the Philly Fed release next Thursday, 1/17/19. Housing Starts are released that morning as well so the economic data will move markets next Thursday. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.