The Citigroup Economic Surprise Index just turned negative. Economic data gets released all the time, and the "expected" results get built in before hand. Some analysts make their living tirelessly predicting the forthcoming results. Those efforts go a long way in pricing the market to an expectation. When the actual results are announced, that surprise (positive or negative) is what actually moves the market. I am sure you have seen an otherwise attractive report cause a sell-off in the markets because a good GDP result was less than expected.
Citigroup compiled all of the data that Wall Street cares about into an index that measures the surprise of the actual results from the expectations beforehand. This is an amazing tool to determine market direction, and it doesn't get enough attention....which is probably good for those that know about it. Over the past few years, the surprise index has been a very accurate leading indicator. It has several peaks around the 50 level and vacillates around 0.
Since 2008 the index has crossed 0 and gone negative before or during each major market sell-off. It turned negative at the end of last week.
There is good reason to believe that the European double-dip recession will have its effects over here. We will see how that pans out, but it isn't a bad time to take some of the profits from the 1st quarter.
Sean
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