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ISM Index: Tricks of the Trade

“You can observe a lot just by watching.”
Yogi Berra.

I read a lot, and my radar is always on for the Wall Street Journal column “Ahead of the Tape.”

Yesterday’s column gave a readable inside look at some ISM Manufacturing numbers, specifically the gap between the New Orders Index and the Inventories Index.

According to the column, when this gap widens, it shows factory orders are coming in faster than inventories can fill them, which of course prompts future manufacturing activity.

The good news? The recent gap between these two indexes has been among the widest in the past 30 years, and the average overall ISM Index was 57.5 in the months following such large gaps. Today’s 52.9 didn’t match that, of course, but was the highest since June 2007 and certainly better than the 50.5 consensus estimate. More good news:  the trends for the two indexes seem to be continuing.

If yesterday’s "Ahead of the Tape" column didn’t make it onto your radar, follow the link below. (A link to the latest ISM written report is also provided.)

For more ISM navel-gazing, see my SA article “The Economy is Growing Under Our Noses,” August 17, 2009.