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Friday, July 30, 2010

ECRI's WLI Up but Growth Rate Still Falls

The Economic Cycle Research Institute, ECRI - a New York-based independent forecasting group, released their latest readings for their proprietary Weekly Leading Index (WLI) this morning. (More about ECRI)
For the week ending July 23, 2010
  • WLI  stood at 121.1, up from the prior weeks reading of 120.6
  • WLI growth fell to minus 10.7 percent from minus 10.5 percent a week ago
Chart of WLI and WLI growth vs GDP Growth
Click to view full size chart
Since ECRI releases their WLI numbers for the prior week and the stock market is known in real time, you can often get a clue for next week's WLI from the weekly change in the stock market. 

Chart of WLI vs S&P500
 Click to view full size chart
The stock market should finish this week up.  Post your guesses for WLI and WLI growth for next week in the comments section plus your reason why.  (example, WLI up + WLI growth up.  Reason, Bernanke dropped dollars from a helicopter this week.)

  1. The WLI for the week ending 7/30/10 will be released on 8/6/10.
  2. Occasionally the WLI level and growth rate can move in different directions, because the latter is derived from a four-week moving average.
Before you claim understanding of ECRI's WLI, make sure you read the article  "ECRI Weekly Leading Indicators Widely Misunderstood."
"Bottom line, neither the “experts” predicting that the sky is falling based on the WLI, nor the other “experts” indulging in misinformed WLI-bashing in an effort to discredit the super-bears, have a real clue to what the WLI is all about...  A slowdown in U.S. economic growth is imminent, but a new recession is not." 
Disclosure:  I am long SPY (charts & quote) in my personal account and in the "Explore Portfolio" in  "Kirk Lindstrom's Investment Letter."

Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 152% (a double plus another 52%!!) vs. the S&P500 UP a tiny 1.4% vs. NASDAQ  down 3.8%!!!   (All through 6/30/10)

In 2009, "Kirk's Newsletter Explore Portfolio" gained 33.5% vs. the DJIA up 18.8%
For 2010, as of 7/26/10, the explore portfolio is up 4.5% YTD
vs. DJIA 
up 0.6% YTD vs. S&P500 up 0.7% YTD
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  1. My guess:

    WLI Down
    WLI Growth Down
    Why? Obama will ruin the economy.

  2. Jim D said...
    My guess:

    WLI up
    WLI Growth Flat
    Why? Market up and Chicago purchasing managers index positive / growing.

  3. I track ECRI’s work and find it a very helpful tool. The WLI had been dropping and turned two weeks ago. This is not long enough to ensure a trend but is could be a hopeful sign.

    The growth rate has been and continues to be negative. July 9th it had a major revision which often comes at turning points. No revisions in the last three weeks this is hopeful.

    Neither of these is yet trend setting moves. Since I tend to see the glass as half full vs. half empty my guess is next week we see improvement in both figures.


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