LEADING OR LAGGING?

There's a lot of talk about leading and lagging indicators in the market. Tune into any of those talking-head financial networks daily and one can hear it.

Not to criticize or poke some fun at all of it, but indicators like the old battery in one's car is good until it isn't any more.

Anyway, Mark Hulbert, the editor a popular newsletter that tracks of financial newsletters and a columnist for MarketWatch, in his latest article, "This stock market index is almost like a crystal ball," cites the Dow Jones Transportation Index and its recent upswing, gaining 10% since the downturn last week.

Considered a leading indicator by many, the Transportation stocks reflect any upcoming economic weakness according to these folks.

 

The reason this is such encouraging news: The Transports are often considered a leading indicator of economic weakness, on the theory that transportation companies should be among the first to reflect any slowdown in economic activity that begins to appear on the horizon. There turns out to be statistical support for this theory: A study conducted by the Bureau  of Transportation Statistics in the U.S. Department of Transportation, titled “The Freight Transportation Services Index as a Leading Economic Indicator.” The authors found that their department’s index over the past three decades “led slowdowns in the economy by an average of 4-5 months.”

  http://www.marketwatch.com/story/this-stock-market-index-is-almost-like-a-crystal-ball-2014-10-24