This week I dug out an old link to the ECRI WLI (weekly leading index). At best, this construct is a coincidence index however it gets calculated. So anyways, ignoring the 'leading' aspect of it ...
Link here: (cal download XLS file of WLI) www.businesscycle.com/reports_indexes/allindexes
Current ECRI WLI with linear channel and poly best fit
Note - if this is an accurate measure of industrial output, that no new high has been made.
A previous chart I did was here, showing Fibs (note the 23.6/76.4 high around 135) - dated Jan2012
If this construct is consistent, we are at 133 and the 2010 high was 135 - ignoring the fact we are a long way off the 2007 high of 144.
How is this relevant? Arguably, it merely confirms the DJIA equity trend (coincident, not leading)
- if it is a leading indicator, then so too is the DJIA.
ECRI WLI versus the WLI rate of change -
- note the declining rate of change - note Jan1995 something special happened to the biggest bull market in history
But what if DJIA value is related tot he ECRI WLI as some kind of ratio? This is ugly ...
$goog is trading at >71 cape ratio - which is simply stupid. The stock split will halve the SP - but it will have no effect on cape. (CAPE = cyclically adj. price/earnings ratio)
By comparison, the S&P 500 (SPX) trades at 25.4 currently
- latest is 25.4 in Mar2014
So where is the ECRI WLI think we are going? NFI your honour ... using some T-theory, we are in an utrend
- however cyclic wise, we are due for a local top
Any way you want to cut it, if things feel slack then the ECRI WLI confirms it. Comparatively, we are not close to a new high using the ECRI WLI as a yard stick, yet the DJIA has made new highs.
Play the trends, if equities break lower it could be further than you think.
China SSEC bounced of recent lows - which still plays into a Feb low. However close examination of the fractals says 2050/60 area is critical and only above 2100 confirms trend.
While COPPER remains unmoved - and the 3.0 neckline remains the only level to confirm anything upside
Broadly speaking, the equity market health indicators possess more personality disorders than I do. This inflection point is ugly , and reflects the mixed consensus of all the experts and punters alike.
Caution is still warranted. Sense and sensibility prevails.
Lastly, the US CPI number is annualised at 4.5%p.a for the first 3 months of 2014 (which is huge). Gold only responds to 2 things - +ve CPI and war.
US CPI since 1900 versus DJIA - note diminishing rate
(20min delay)