Monday, April 26, 2010

The ECRI's Weekly Leading Indicator (WLI) Is Worthless

CXO Advisory took a look at the relationship between the ECRI's Weekly Leading Indicator (WLI) and the stock market:

There is no evidence that WLI leads stocks, especially given that ECRI releases WLI preliminary/revised readings with one-week/two-week lags.

In summary, evidence from simple tests suggest that ECRI WLI movements coincide with or slightly trail stock market behavior, offering little trading intelligence over the short or intermediate terms.

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