The rally from hell (for the bears) continues. Continues in the face of ever deteriorating economic conditions, rising interest rates and bullish sentiment. Something to do with the election? Well I’m not much of a conspiracy theorist, but with Paulson from Goldman Sachs runnning the Treasury I would not dismiss the possibility. In any event, here’s a good illustration of the divergences. The picture, thanks to Bloomberg, shows the ECRI index of leading indicators (Economic Cycles Research, a service to which I subscribe) and its historical correlation with the S&P 500. As one can see, the ECRI index is going one way and the market another. Unusually so. It doesn’t seem likely that the economy is going to follow the stock market.