My recent update on the Consumer Metrics Institute Growth Index prompted a thoughtful response from James H. Ross, R.A. in Wilmington, NC.

With regard to your question of whether the CMI Growth Index is a leading indicator for the S&P 500, I have a definite opinion. The index dance along its 200-day moving average late last summer and into early fall validated the CMI index as a leading indicator in a normal functioning market — as long as one understands that the current equity market is not a normal market but is one that is heavily subsidized by the Federal Reserve.

What would have happened to the S&P 500 if QEII had not materialized? Indeed, what would have happened if QEI had not been implemented? It brings to question whether or not the entire exercise of QEI and QEII do not represent an example of the imaginary (?) Plunge Protection Committee at work. I'm not suggesting a conspiracy theory, just a hard look at the facts. When one understands the level of created money from the Federal Reserve and their key banks, then I think the answer is clear. See the recent article by Northern Trust economists Paul Kasriel and Asha Bangalore, The Fed Terminates QE, We Lower Our GDP Forecast.

QEII and its predecessor QE are distortions of the market and must be understood as what they are — a Fed subsidy of speculative investment assets.

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For a quick reminder of the correlation between the two rounds of quantitative easing and the market, see this commentary, which included the chart below, updated through yesterday.