Is the retail economy getting weaker?

The New Economy Index chart shown below has recently made lower peaks.  Whenever this has happened it has historically been followed by a temporary decline of the NEI, though not always threatening to the main interim uptrend.  

An NEI “sell” signal means the U.S. retail economy is weakening with results being felt mainly in terms of softer sales of consumer discretionary purchases, but also declining sales volumes for small and mid-size business shippers like FedEx and UPS.  If the NEI declines long enough, it can also signal the onset of an outright economic recession. 

A “sell” signal in the NEI is made whenever the 12-week moving average (red line) crosses under the 20-week MA (black line) and the NEI itself declines below its nearest pivotal low.  As mentioned previously, this hasn’t happened since May 2010 – and at that time the sell signal only lasted a month or two as the retail economy weakened a bit in the wake of the stock market’s “flash crash.”  Otherwise the NEI has been in a confirmed uptrend for most of the last four years.  It will be important then to keep a close eye on the NEI in the coming days and weeks for a potential short-term trend change.