My weekly cyclical fundamental indicator turned up sharply at the end of Aug. 2010, rising by
30% through early Apr. 2011. Over much of the same time frame, the SP 500 rose by 28% to a
new closing cyclical high of 1364 through Apr. 29. Both the market and the indicator have
weakened somewhat since the spring, although the market has held up better. Stocks have
essentially rallied during periods when the weekly indicator suggested the economy was gaining
momentum. The stock market has also moved closely with the intervals of QE by the Fed, and
when you look at the three measures it is clear that the market and economic confidence have
benefited from having the Fed's QE tailwind as support. Note as well even though QE did not
wind up until the last week or so, the Fed has described the end of the recent round for several
months.
Interestingly, both non-QE related financial liquidity and my weekly coincident economic
indicator have been inching ahead recently, but some key indicators I use in the weekly market
indicator such as sensitive materials prices, initial unemployment insurance claims and the 2 yr.
Treasury yield have not been behaving in support of a higher market. Since the latter indicators
grab more of the headlines, investors have been awaiting some of these more popular measures
to suggest that the economy is regaining positive momentum.
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