Time the Markets: Using Technical Analysis to Interpret Economic Data, Revised Edition

7. Monetary Indicators

Monetary factors include interest rates, bond prices, spreads between interest rates, and credit. I test several of these monetary indicators to see if a moving average crossover system can be developed using their data for market timing. As always, with any method using market prices, a protective stop and trailing stop rule are applied from optimization of the in-sample data.

Interest Rates

As the Fed’s stock market model suggests in Chapter 5, “Corporate Indicators,” many analysts believe that the stock market is affected by interest rates, not only as a competing investment to stocks, but also as an indicator of increased economic activity. Generally, higher interest rates reflect increased borrowing costs for plant ...