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Martin Pring's InterMarket Review - U.S. Stock Market (Jan 2013)

The long-term indicators continue to paint a bullish backdrop for equities. For example, our Stock Barometer is at 66% and the Total Return Model in Chart 9 remains above its zero reference line.

However, being positive and being on a positive trajectory are two different things. You can see that the usually reliable Total Return indicator is currently falling quite quickly and could move into negative territory within a couple of months. At the moment, leading economic data supports the idea of higher prices.

For example, Chart 11 shows that there is a reasonably close relationship between the S&P and the ECRI Weekly Leading Indicator. That series has just succeeded in breaking above a 5-year down trendline, and since its long-term KST (not shown) went bullish a few months ago, it looks as though the economy is headed further into recovery territory.

The barometers, with their probable move into Stage IV in January, add additional weight to this idea.

To read more, please download the PDF here.