What is the Consumer Metrics Institute Growth Index saying?
There are two charts shown below that should give some pause to the recovery story. The first is the Consumer Metric Institute's Daily Growth Index vs. BEA's Quarterly GDP (which can be found here: http://www.consumerindexes.com/commentary_2010_dailygrowthindexvsgdp.png and the second is the Consumer Metric Institute's Growth Index vs. the S&P 500 which Doug Short put together here: http://dshort.com/articles/Consumer-Metrics-Growth-Index.html.
Both are quite compelling. Discussing the second chart for a minute:
1) The CMIGI predicted the 2007 top a few months before it occured
2) The CMIGI predicted the 2009 bottom a few months before it occured
3) Is the CMIGI predicting the 2010 top (i.e. was the top seen in April)? As of yet the CMIGI is not predicting a bottom.
So what of Question 3? Taken by itself, I think it is inconclusive. But combined with John Hussman's observations on the ECRI - John Hussman: Recession Warning (Unthinkability is Not Evidence) - http://caps.fool.com/Blogs/john-hussman-recession/413455 and several other leading macroeconomic indicators, I think the case is compelling for continued weakness in the S&P 500 (i.e. We have not seen a bottom yet) and at the very least the downside risk dwarfs the upside risk.