The following article updates the diffusion index, recession slack index, aggregate recession model, and aggregate peak-trough model through July 2015. In January 2015, I created a new explanatory variable for a market-based indicator and I added another new explanatory variable in April 2015, and another in June 2015.
Each of the explanatory variables has predictive power individually; when combined together, the group of indicators is able to identify early recession warnings from a wide range of diverse market-based, fundamental, technical, and economic sources. The total number of explanatory recession model variables is now 21. The current and historical data in this report reflect the current model configuration with all 21 variables.
In July 2014, two new explanatory variables were added to the Trader Edge Recession Models and one explanatory variable was replaced. The swapped variables measured similar economic data, but the new series had more predictive power and was more forward-looking. For more information on the changes in July 2014, please see "Two New Improvements to Trader Edge Recession Models." Continue reading