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Kirk Lindstrom has an engineering degree from the University of California, Berkeley. Following 20 years of research and development as a scientist and engineer at Hewlett Packard, Kirk turned his attention to investments where he edits "Kirk Lindstrom's Investment Letter," that... More
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  • WLI Growth Rate and Death Cross for S&P500 4 comments
    Jul 23, 2010 3:43 PM | about stocks: SPY, SPY
    Despite the "Death Cross" in the S&P500, as of today we have heard of no change in ECRI's economic outlook of  a slowdown without a double dip recession as we reported at ECRI Weekly Leading Indicators Widely Misunderstood.

    Chart showing recent "Death Cross" for the S&P500:

     Click chart for full size image

    The Economic Cycle Research Institute, ECRI - a New York-based independent forecasting group, released their latest readings for their proprietary Weekly Leading Index (WLI) this morning. (More about ECRI)
    For the week ending July 16, 2010
    • WLI  stood at 120.7, unchanged from the prior week which was originally reported at 120.6
    • WLI growth fell to minus 10.5 percent from minus 9.8 percent a week ago, its lowest level since May 15, 2009, when it stood at minus 11.1 percent.
    This is a chart of the S&P500 (charts + Quote) vs ECRI's WLI from October 1, 2004 through July 23, 2010. 
     Click chart for full size image

    Which way do you think the Market and WLI will go? With the stock market up this week, the odds are good that WLI will be higher next Friday.



    Disclosure:  I am long SPY (charts & quote) in my personal account and in the "Explore Portfolio" in  "Kirk Lindstrom's Investment Letter."

    Disclosure: Long SPY
    Themes: ECRI Stocks: SPY, SPY
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Comments (4)
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  • untrusting investor
    , contributor
    Comments (9966) | Send Message
     
    Well if you think your S&P and WLI overlay chart, which pretty closely track each other, have any validity whatsoever, you are pretty nuts to be long the market.

     

    If not, then what is the point of your article? Or are you counting of some other factors not indicated in your article? Always thought engineers followed the evidence in arriving at a conclusion. But apparently the evidence of the S&P/WLI overlay is somehow meaningless.
    23 Jul 2010, 05:26 PM Reply Like
  • Kirk Lindstrom
    , contributor
    Comments (645) | Send Message
     
    Author’s reply » "Well if you think your S&P and WLI overlay chart, which pretty closely track each other, have any validity whatsoever, you are pretty nuts to be long the market. "

     

    You are falsely assuming I believe the market follows WLI. In fact, I believe it is exactly the opposite.

     

    "If not, then what is the point of your article? "

     

    To point out a strong correlation.
    24 Jul 2010, 10:25 AM Reply Like
  • untrusting investor
    , contributor
    Comments (9966) | Send Message
     
    Kirk,
    So the WLI is a lagging indicator, is that what you are saying? Hmmm, not what ECRI claims, nor is it what the term leading indicator means. Perhaps the many thousands of customers of ECRI should request a refund of the millions they pay in subscription fees for leading indicator information and simply look at the free daily S&P chart moves to infer what direction the economy or markets are heading. So would guess that somehow you think the downward trend of the S&P, which is clear on the chart, has reversed into an uptrend based on a few days of price movement. Maybe so and maybe not, but nothing in the WLI would support that conclusion. Your point seems to be that the S&P is the leading indicator and that WLI is just a useless indicator or metric that simply mirrors the S&P.

     

    Would you care to try and prove that with a valid data and statistical analysis that supports your assertion that changes in the S&P lead changes in the WLI, as opposed to visa-versa? It just might be worth your while, as you could save all the ECRI subscribers many millions of dollars in subscription fees and maybe convince them to divert those millions to your newsletter and your superior forecasting methods.
    24 Jul 2010, 11:51 AM Reply Like
  • Kirk Lindstrom
    , contributor
    Comments (645) | Send Message
     
    Author’s reply » I think you need to read ECRI's book. WLI is a leading indicator for the economy. The markets are ALSO OFTEN a leading indicator for the economy. What the markets do week-to-week are part of what makes up WLI. Market data is in real time. ECRI releases their index a week later.

     

    I don't forecast the economy. Their record speaks for itself. Stick with ECRI. I pick great stocks that do well over time and I trade their volatility based on many factors for added return. My record speaks for itself.
    25 Jul 2010, 09:51 AM Reply Like
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