Composite Leading Indicator

Hey everyone and thanks for jumping back Into the macroverse Today we're going to talk about the Composite leading indicator or CLI if You guys like the content make sure you Subscribe to the channel give the video A thumbs up and check out into the Cryptoverse premium at into the the composite leading Indicator is a good metric to sort of Determine changes in say where we are Within a business cycle so it's combined Of a lot of different economic Indicators such as the sentiment Consumer confidence and industrial Production and it can often show you a Turning point in the US economy right Now why do we care about this we do know That the stock market and the economy Are two very different things and one Thing to remember though is that even Though a recession can go on for a while The stock market can typically bottom Before a recession is over right Now one thing we've mentioned many times Is in reference to the yield curve and I'm going to do an updated video on that Soon but it's the idea that the yield Curve is a predictor of a recession once It gets resolved while it's sitting Inverted it's typically not a good Predictor of a recession right so of Course we have all sorts of calls for a Recession we've had people calling for a

Recession for the last year and a half But remember the idea is that while it's Inverted it typically means we're not in One okay that's not to say that it's Never meant that but typically speaking When it's inverted like it doesn't means We're not in one and when it uninverts You normally get the recession because That's what caused the you know when the FED breaks something they have to you Know they have to go back to period of Quantitative easing typically and and That's where the recession occurs but One of the interesting things if you Look at this indicator You can kind of see it Ebbs and flows This is you know you can sort of Visualize the business cycle but what You'll notice is that the composite Leading indicator once it starts to turn Back up It's pretty it's it's usually a good Sign right usually a good sign okay once It starts to turn back up now you'll see This time and time again how turning Back up typically means that we're Heading to new highs right not every Single time right but most of the time Once it starts to turn back up to the Upside it's an indication that the Bottom is either in or very close to Being in okay What you'll also notice is there is a Period over here back in 2000 2001.

Where it turned back up and this is one Of those rare cases where the market did Not bottom during the recession it Actually bottomed you know a little bit Later again we do have to go back in our You know in our minds think about what Happened in 2001 and sort of the Fallout The geopolitical consequences of what Occurred and and you could argue that That's had some you know bearing on on Another leg lower by the stock market Back then but typically once this Leading indicator starts to turn back up Right it's an indication that things are Slowly starting to turn back around You'll also see this over here in in 2020 as well right it it went down Pretty quickly and it started to move up Quite quickly as well and once it turned Around that was sort of the notice right It was it was sort of like the notice to The Bears that's like well you know you Might be bearish but the indicator is Already turning back around and it seems Like we're you know we're headed for new Highs now where are we now right And by the way you could also look at This to sort of try to try to look at Tops right like it kind of tops fairly Close to where the stock market tops as Well right time and time again it's not It's not the worst indicator to have I Mean it doesn't always tell you the Exact top but once this starts to come

Down It should send off you know it's a Warning sign right it's like hey like Something's not right the economy is Sick and it will likely be felt within The stock market soon Look what's going on right now when did It flash look at this it flashed in June Of 2021 meaning that's when it started To really roll over here right started To turn back around what's interesting Again though is that it didn't mark the Top for the s p but it got relatively Close if you think about where crypto Was it kind of marked what a lot of People would consider to be the real top Right at like 64k of course we know that We went to 69k later in the year But You know I think a lot of people had They just sold the first Peak and just Tuned out of crypto would have been Quite happy right even though in the Short term they might have been upset Because it went to a new high had you Just gotten completely out of the market At the first Peak and then just waited I Don't think you'd be that upset about it Today now if you look at where this Leading indicator is right now you can See it's still in a decline right it's Still moving down Um and it hasn't really shown a clear Sign of turning back up to the upside

Just yet it doesn't mean it can't Um and and you can almost see that it The rate of change here is perhaps Slowing a little bit so why don't we Look at a monthly change so you can see That it is slowing slightly right so it Is decreasing okay it is decreasing but It's not decreasing at the same Pace as It was before right it's not quite Decreasing at the same Pace that it was Before I mean you can see over here right back In Crash it was going down Pretty quickly and and then you know at The the stage of the recession it then Sort of changed its Pace where it went Down just a bit lower to Mark the bottom And then we popped back up and again Arguably that could have been the bottom Had you know had the events in 2001 that Occurred of course we'll never know Right unless you can go to a parallel Universe where that didn't occur I mean It's all just um you know pure dubious Speculation right but again you know an Interesting indicator to look at is is Is the composite leading indicator and And really to also take a close look at The uh at the the derivative right the Rate of change of it to see is it Showing signs of of of getting stronger Or is it showing signs of getting weaker So you know you can see that the the Rate of change here started to go back

Up meaning it wasn't going down quite as Quickly but even that is sort of Leveling off a little bit so I mean it Could also just turn right back down Again for all we know but again this is I think a useful indicator And you know once we see this start to Carve out some type of a bottom like we Saw you know in 2009 and and over here In 1990 and and in 82 and an 80 and it Was 74 and 70 and so on and so forth Right once you see this start to carve Out a bottom that could be an indication That the bottom for the S P 500 is Actually in right I mean or close to it Right within you know maybe a plus or Minus a couple months or a few months or Something this could be the indication To look for so it might be one of those Invalidation criterias right so like if You're a bear if you're a bear right now Uh because you think a recession is Coming and and you want to know you want To like say okay well what could I use To tell me that hey maybe maybe things Are actually turning around at the Bottom so I'm close I think this could Be a useful indicator right it's a Compatibility leading indicator and it's Again it's made up of things like Business sentiment consumer confidence And industrial production And it's used to forecast future Economic activity so and and the whole

Idea is for to provide early signals of Turning points in business Cycles so We'll continue to keep an eye on this Indicator we have been talking a lot About the macroverse recently of course I do think it's very important Especially in navigating Equity markets As we do know that Equity Equity markets Are heavily tied towards uh you know Towards earnings and and you know Recessionary fears with regards to the Crypto markets it's sort of like our First rodeo with you know with a Potential recession right other than the Short one that we had in 2020 it's kind Of our first rodeo with a recession uh But certainly for Equity markets Seeing this continue to go down is is Something that we should continue to pay Attention to if you guys like the Content make sure you subscribe to the Channel give the video a thumbs up uh Remember to check out into the Cryptoverse premium at into the we do have several Different tiers that you can check out One of which is free so make sure you Check that out subscribe I'll see you Guys next time bye


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