Tuesday, February 8, 2011

Fundamental Stock Market Indicator

Is our Fundamental Stock Market Indicator (FSMI) still a good coincident indicator for the S&P 500? We think so. Our FSMI is the average of the Weekly Consumer Comfort Index (WCCI) and our Boom-Bust Barometer (BBB). It gained 2.0% during the final week of January, recovering two-thirds of the loss the prior two weeks. Before the recent decline, it had increased 21 out of 23 weeks. The FSMI is back within 1.2% of its recent high for the cycle.

The BBB, which is the ratio of the CRB raw industrials spot price index to the 4-week average of jobless claims, has driven the move up in the FSMI, though it has been in a volatile flat trend in recent weeks as the 4-wa in jobless claims moved steadily higher since the start of the year. Meanwhile, the CRB raw industrials spot price index remains on its vertical ascent. The WCCI plunged 5 points during the first week of February, erasing all the improvement in the early weeks of this year.

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