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Friday, August 13, 2010

ECRI's WLI and Growth Move Higher

ECRI's WLI and WLI Growth Rate Both Up

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 August 6, 2010
  • WLI  stood at 122.4, up from the prior week's revised (lower) reading of 121.7.  The lowest readings for WLI this year was 120.6 for the week ending July 2 and 16.
  • WLI growth moved higher for the second week in a row to minus 9.8 percent from minus 10.3 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
More S&P500 Charts and SPY Charts

Chart of WLI vs DJIA
  Click to view full size chart
More DJIA Charts

Commenting on the numbers, ECRI's managing director Lakshman Achuthan said, "The WLI plummeted for two months through late June before flattening out and then rising to a nine-week high. But if it turns down once again, that would signal heightened recession danger."

  1. The WLI for the week ending 8/13/10 will be released on 8/20/10.
  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 and quote) in my personal account and in the "Explore Portfolio" in  "Kirk Lindstrom's Investment Letter."

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