Conference Board gives economy a thumbs up

The Leading Economic Index has been up for five of the past six months.

By Jim Van Meerten Jan 21, 2010 1:11PM
The Conference Board's Leading Economic Index  has increased for the fifth month out of the past six. For those of you who follow me, you know that I try to have a very disciplined approach to investing. My approach has four components:
  • Know what the economy is doing.
  • Know what the stock market is doing.
  • Buy only stocks hitting new highs in at least 50% of recent trading sessions.
  • Manage the portfolio you own by selling at your predetermined maximum loss point.

To know how the economy is doing, I ignore all the daily and sometimes hourly news reports on the economy and wait for the Conference Board's monthly report that usually comes out the third week of the month. The reports are simple, with an analysis of just 21 indicators divided into leading, coincident and lagging indicators.


In my mind, I picture a roller coaster with cars in the front, middle and rear. I want to know if the leading cars are on the way up, down or about to reverse direction. I've included a link to the report above, but I'll summarize it for those of you who don't want to read the whole report.

  • Twelve of the 21 indicators are up with 2 others holding steady.
  • Leading Economic Index up 1.1% -- 8 of 10 up -- average work week and new orders still down.
  • Coincident Economic Index up .1% -- 3 of 4 up.
  • Lagging Economic Index down .2% -- 1 up (that's the labor cost per unit) the other 6 still down.

Now, that's component No. 1: Know what the economy is doing, and each weekend after the market closes on Friday I'll publish how I determine what the market is doing.

 

Please let me know what you think of my approach.

 

Jim Van Meerten is an investor who writes on financial matters here and on Financial Tides. Please leave a comment below or email JimVanMeerten@gmail.com

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