ECRI TURNS NEGATIVE
Via Barrons:
The Economic Cycle Research Institute today offered up its view of last week’s “weekly leading indicators,” a closely watched private mailing, today showed a dip in the indicator for the week ended last Friday to 123.2, a decline of 3.5%, in contrast to the 0.3% rise the preceding week.
The Institute’s Lakshman Achuthan, however, remarked that “While the plunge in WLI growth to a one-year low assures a significant slowing in U.S. economic growth in the coming months, the recent weakness has not lasted long enough to signal a new recession threat.”
The ECRI notice follows better-than-expected consumer confidence data this morning from the University of Michigan, but also a smaller-than-expected gain in business inventories in April, this morning’s weak retail sales data for May and, of course, last Friday’s disappointing jobs number.
The WLI growth indicator was negative for most of the summer in 2006. The economy continued to expand (bubble or otherwise) well into 2007. So unless this indicator is negative consistently for a few months, it doesn’t mean much
It was only marginally negative in 2006. The key will be the next few readings. Nonetheless, it is still questionable to me whether this is really a leading indicator at all. It seems to have an extraordinarily high correlation to the S&P.
Notwithstanding the possible correlation here, the fundamental picture appears to be weakening in front of our eyes. The evidence is becoming more overwhelming by the day.
This snapback rally is now creating the opportunity to go short the market if you missed out end of April. TPC I can now see why you said the risk/reward wasn’t that great a week or two ago…oversold markets in the very short-term can rally on negative or no news.