Thoughts on the Dismal Science

 

Date: 9/26/2022
Author: Chris Hood

 

 


Are we actually in a recession? And if we’re not, are we headed for one?

I really don’t know.

High-profile pundits, in typical fashion, are debating this endlessly. Everyone seems to have an opinion.

Most of the disagreement is due to definitions.

If you go by the standard definition of two consecutive quarters of negative GDP, we hit recession territory this summer.

However, we aren’t if you follow the National Bureau of Economic Research (NBER) criteria.

The NBER criteria define it as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.”

Do you see now why I don’t bother with economic theories anymore?

They have almost no predictive value as to where the market is headed. Ultimately recessions will be identified after the fact.

If economists knew so much, they’d all be billionaires.

I study what the market is currently doing and where it’s likely to head in the near term. That’s why I created my trading tools.

All of the most profitable traders I know use technical analysis.

Sure some get rich making long-term predictions, but in my opinion, this is more about luck than skill.

Think about long-term market predictions just as you would the weather forecast.


Market analysis to put you ahead of the curve…every trading day.


You’re standing on the street corner, getting drenched by rain.

If you’re anything other than delusional, you’ll put the change of precipitation at 100%…my advice is to find some shelter ASAP.

There’s no need to check the weather on your phone to know what’s happening.

Now assume it’s Wednesday and you’re going to an outdoor concert on Friday. It wouldn’t be a bad idea to look at that phone.

A three-day forecast is usually pretty accurate.

If the chance of rain is about 10% or less, keep your plans. No worries at all.

But if all you see are pictures of clouds, lightning, and an 80% chance of getting soaked, then it might be prudent to change your plans.

Or pack a rain suit and tent.

So far, so good.

Let’s take this analogy a bit further.

How much do you trust the weather channel to predict rain 3 weeks from now? Or on a Friday six months out?

Meteorology and market predictions have a lot in common.

Remember this when you’re tempted to fall prey to a smooth-talking economist. Believing a thesis is okay, but never trade on that idea alone.

No matter how dressed up their outlooks are in fanciful talk, historical examples, and words you don’t understand, their pronouncements are still just opinions.

The “experts” don’t lose money if they’re wrong, but you will if you follow them.

Always run the trade idea through your indicators.

The market cares as much about opinions as the weather.

For that very reason, my trading focuses on the short-term predictions of my high-probability indicators. It’s because I tend to do what consistently turns a profit.

And I’m a naturally cautious guy.

It doesn’t matter what the forecast says; a dark sky or rumbling thunder means I’m bringing an umbrella.

Cheers,
Chris Hood

 


Share this:

Facebook
Twitter
LinkedIn
Pinterest
Reddit
Email
Print

test

By registering you are agreeing to our privacy policy

Are you ready for The Great American Reset?