In January of this year the MTR-EM indicated that 3-6 months out there could be some consumer spending issues that may impact stock prices. We did see a downturn in the market that was probably much stronger than most anticipated. Our MTR-TM has been whip-sawed on recent signals.
Over the past two months the model started showing improvement where employment and real-wages (wages adjusted for inflation) are on the rise. This is in part to lower energy prices in the past few months. Typically when real-wages shows +2 to +4% the market typically follows 3 to 6 months later.
The model is now showing zero year over year changes. This is a positive sign over the last few months. We will be watching this model and if we see a +2 to +4% rise in real-wages in the next few months the 4th quarter of 2010 should work out well for the stock market.