The Chemical Activity Barometer(CAB) was reported at 98.8. The relationship between the CAB and the SP500 is displayed in the chart below. While market psychology is the determinant of securities’ pricing, the long term determinant of market psychology across the business cycle has been economic activity. For this reason, the CAB has been a good indicator of the direction of equity prices the next 18mos-24mos when used in conjunction with other economic indicators.
The continued uptrend in the CAB is positive for equities based on history.