Crazy Indicators

There is no shortage of weird but successful indicators to measure market performance and provide insights on when and how to invest.

I talked about the Super Bowl Indicator in a previous e-newsletter. This is the belief that if the American Football Conference wins, there will be a decline in the coming year and if the National Football Conference wins the Super Bowl, the S&P 500 will rise.

The Lipstick Indicator, introduced by the chairman of Estee Lauder, Leonard Lauder, suggests that when individuals feel uncertain about the economy, they turn to less-expensive vanities, such as lipstick instead of more expensive items like dresses and handbags. Therefore, when a spike in lipstick sales occurs, watch for an upcoming bear market.

The Wall Street Job Indicator actually makes sense. This dictates that when more appealing jobs appear on Wall Street, the economy is likely in a bubble. As more of a market exit, this indicator suggests that if more than 30% of Harvard graduates go into these jobs, it’s time to sell, while investors should buy if less than 10% of graduates take these jobs.

The Sports Illustrated Swimsuit Edition Cover Model Indicator suggests that the S&P 500 will outperform its historical returns when the model is from the United States.

The Cardboard Box indicator is based on the fact that just about everything is shipped in a cardboard box. Given a stronger demand for boxes, the economy is growing, and of course, the opposite is true.

Another index for currency traders is the Big Mac Index. This essentially looks at the cost of a McDonald’s Big Mac in 120 countries. Given that it is basically the same in each country, the notion is that it should cost roughly the same everywhere. By comparing the price of this food item using exchange rates, traders can determine if a country’s currency is over or undervalued.

Then there is the Pentagon Pizza Meter. I was recently reminded of this indicator that refers to the sudden, observable surges in takeout food orders from offices such as the Pentagon, CIA or the White House, right before a major international event or crisis prior to when the public is notified. Government officials stay late to monitor developing situations such as the possibility of a war or coup and order takeout food. This index can be monitored through open resources such as Google Maps, which show when these business locations are abnormally busy. When you see a surge in Domino’s Pizza deliveries, watch for a major event in the coming hours or days. Conversely, local bars show less activity than usual as government employees who would normally go out after work are sequestered in the office instead. Apparently, those monitoring this gauge were not at all surprised by the recent U.S. attack on Iran.

The bottom line is that while it is fun to look at weird and wacky market indicators, bear in mind that most of these ‘trends’ are really just coincidences and not something to base serious investment strategies on.

On a final note, as very short-term day traders, you would be wise to follow the ‘Hugh and Jon DayTradeSPY’ indicator, which suggest that when my fellow trading room partner, Jon Johnson’s indicators unites with mine, your trade will likely be solid gold. Our indicator holds the truth that “when our indicators unite, our trades ignite!”

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