Related Topics
Economy , US Markets
     

Look at These 2 Big Warning Signs for the U.S. Economy

Interestingly, this economic measure’s “retracement of the decline from February is a Fibonacci 61%”

by Bob Stokes
Updated: November 23, 2020

The 7.4% GDP growth in Q3 notwithstanding, the evidence shows that the U.S. economy remains fragile.

Let's start off with this chart and commentary from our November Elliott Wave Financial Forecast:

IndustrialProduction

The chart shows the NYSE Composite index along with U.S. Industrial Production. The IP index declined with the stock market into April of this year, and then rebounded with the stock rally. So far, the Industrial Production retracement of the decline from February is a Fibonacci 61%.

Another warning sign for the U.S. economy is provided by this chart -- also from the November Elliott Wave Financial Forecast. Here's the commentary:

FiveDecades

The chart shows the same retracement in U.S. Capacity Utilization, which tracks the extent to which working factory capacity is being used in the production of goods. It also reveals the presence of a steady, long-term decline. Capacity utilization has been registering lower highs and lows since the 1970s. As [Elliott Wave International] said in September with respect to a decades-long deterioration in consumer credit, the economy is up against much more than just "a short-term, pandemic-induced decline in demand."

Indeed, U.S. consumers appear to be adopting a conservative mindset.

Here's a Nov. 15 headline from the Financial Times:

Bank credit card profits in question as US consumers pay down debt

At this juncture, this developing conservative psychology portends deflation.

As the 2020 edition of Robert Prechter's Conquer the Crash says:

The psychological aspect of deflation and depression cannot be overstated. When the trend of social mood changes from optimism to pessimism, creditors, debtors, investors, producers and consumers all change their primary orientation from expansion to conservation.

Get our complete analysis of the economy and learn why Elliott Wave International anticipates a historic deflation.

You can find that analysis inside our flagship investor package: The Financial Forecast Service.

Elliott Wave Junctures: The Right Place at the Right Time

Sometimes, sheer luck is why we find ourselves in "the right place at the right time."

Yet in the world of investing, you can go broke before you get lucky -- if you don't have a proven method for participating in financial markets.

We invite you to take a close look at the Elliott wave method.

This excerpt from Frost & Prechter's book, Elliott Wave Principle: Key to Market Behavior, provides insight as to why:

When... the apparent jumble gels into a clear picture, the probability that a turning point is at hand can suddenly and excitingly rise to nearly 100%. It is a thrilling experience to pinpoint a turn, and the Wave Principle is the only approach that can occasionally provide the opportunity to do so.

So, yes, applying the Elliott wave method can help you be at "the right place at the right time."

If you prefer, given most of us have busy lives, our Elliott wave experts can do the work for you.

See how our analysts are using the Elliott wave method to guide subscribers by checking out our flagship investor package.

Just follow the link below.

EXCLUSIVE

Corporate Debt: A Trend to Watch in 2021

LQD is a well-known investment-grade corporate bond ETF. Watch our Interest Rates Pro Service editor show you a clear Elliott wave pattern starting to emerge in this market -- and explain what this likely means for corporate debt next.

Does the Fed "Control" Gold Prices? See the Facts and Forecasts

Mainstream economic wisdom says Federal Reserve policy drives the price trends of gold. Now see the facts, charts and forecasts and show otherwise.

This Measure of Small-Trader Optimism Is OFF THE CHART

Here are EWI, our analysts regularly review 100+ market indicators to keep subscribers ahead of big price turns. Right now, one of these indicators -- a measure of the stock market optimism, as reflected by small options traders -- is flashing a warning signal. Our monthly Financial Forecast co-editor explains.