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LOOK OUT FOR MARCH 15TH. PCI AND THE COLD WATER RECOVERY, ACT TWO.

|Includes: AMD, BWEN, EXXI, LPL, PAL, PCP, Suntech Power Holdings Co., Ltd. (STP), VEDL, YGE
Below are a few more important quotes from the PCI diesel truck consumption index released March 10th. It is clear that the volatile nature of this leading indicator is important in making trading decisions. If real GDP will be flat to down in March and expectations are quite different, a strong market correction could occur. It’s obvious that March data must be extremely robust and rail traffic and Long Beach container shipping must also reflect this trend. Based on the market response to the industrial production data release, I will decide on whether to liquidate positions in: STP, YGE, LPL, EXXI, PAL, TIE AMD and SLT, I was stopped out of BWEN last week.
 
Further quotes From the February Ceridian UCLA report:
“To sustain at least a 4% GDP number for the first quarter, the March PCI has to be significantly stronger than January and February at over 1% growth. That number will be very important. It will reveal where the economy is headed and whether March truly is a catch-up month after a snowy February”
 
“After almost two years in the red, the year-over-year change in the PCI became positive with the big increase in December 2009, and the January and February 2010 PCI values have produced a slightly larger year-over-year change of about 5%. These rates of increase are approximately normal levels, but not the 10-15% rates that would be produced in a recovery strong enough to put Americans back to work.”
 
“The movement of GDP and the PCI (seasonally and workday adjusted) around their peaks are compared in the figure below. Over the decade since 1999, Real GDP and the PCI have grown at very similar rates, but the PCI experienced an early and amplified decline in the recession of 2008/9. “Early” and “amplified” are the two essential features of a useful leading indicator.”
 
“The volatility is in goods and structures — the 37% of GDP that gets loaded onto trucks. The PCI lies between the goods component and the structures component. That is what a leading indicator ought to do – concentrate on the volatile components of GDP that are the main reasons for economic downturns.”


Disclosure: long all except bwen