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What is the Consumer Metrics Institute Growth Index saying?

Recs

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July 31, 2010 – Comments (7)

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.



7 Comments – Post Your Own

#1) On July 31, 2010 at 3:19 PM, blesto (31.75) wrote:

According to the 2nd chart, would it be fair to say that we won't see another bottom until the CMI crosses the S&P again?

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#2) On July 31, 2010 at 3:40 PM, binve (< 20) wrote:

blesto ,

The second chart displays the data on two separate vertical axes (left and right), as such there is no true "cross" in the data, but I do know what you are getting at. If this same pattern holds true, then when the CMIGI exhibits a definitive upturn for a couple of months, then we would expect a bottom in the S&P a few months after that. So the point being that we should not expect a "bottom" here (the one in July) since the was no corresponding bottom in the CMIGI a few months ago.

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#3) On July 31, 2010 at 8:38 PM, Mega (99.96) wrote:

Nothing silly, Consumer Metrics Instiute Growth Indexes can't talk!

[Rimshot.]

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#4) On August 01, 2010 at 9:22 AM, binve (< 20) wrote:

MegaShort ,

yuk, yuk, yuk. I'll be here all week! :)..

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#5) On August 01, 2010 at 10:00 AM, ragedmaximus (< 20) wrote:

 can you please put up a good DOW priced in gold chart. I hear it is a good indicator of where the dow is headed. the charts on the internet i've found are not very good  but indicate dow peaking and will trend down toward the other chart line which looks like it fell off a cliff 

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#6) On August 01, 2010 at 10:01 AM, ragedmaximus (< 20) wrote:

ie dow crashing soon hard

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#7) On August 01, 2010 at 10:26 AM, binve (< 20) wrote:

ragedmaximus ,

I have many times. Here is my latest update: http://caps.fool.com/Blogs/update-on-the-dowgold-ratio/387921. And if you look through my blog history, you can see that I have discussed it often. This is another you might like that gives a lot of insight on how to interpret the DGR given the current macro situation: http://marketthoughtsandanalysis.blogspot.com/2010/01/dow-gold-ratio.html.

>>dow crashing soon hard

I am in this camp too.

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