DATA

Two big events are scheduled for this week in the form of retail sales and industrial production. But what will they teach us about where the economy stands in the recovery?

Retail sales will reveal the extent to which consumers held back from regular spending and opted to enroll in the government's cash-for-clunkers scheme. It's a big question.

There's stimulus and then there's stimulus.

If consumers take advantage of a $4,500 rebate check from the government for buying a new car and auto production picks up along the way, that's great. But if the impact is purely temporary on the output of the nation's car producers and ultimately reduces consumption across other retail outlets, then one has to ask what's the point?

Well, things aren't quite that simple. Manufacturing output for about half a year has turned around. The impact of the stimulus is more than simply an immediate boost, rather it is to change the mindset of investors, consumers, retailers and the media.

It creates a point of respite - a halfway house up the mountain if you will - somewhere that a weary traveler can rest, assess and find refreshment from an otherwise torrid journey.

The economic stimulus is no different. It diverts investor attention away from bad news and helps to focus everyone's attention on what might happen. Put another way, it's a way of pulling the rug from under the feet of the bear. If enough people think that there's potential from a stimulus package, it can be enough to turn leading indicators including investor sentiment - and that's something you simply can't underestimate.

Some corners have accused us recently of ignoring all of the behind the scenes bad news. And we have to be the first to admit it: Behind the scenes, things are admittedly shaky. But as we also eluded recently, we are foremost market traders who have our receptors most closely tuned into reality rather than straight-line trading - things simply don't move that way in reality.

What we have to be extremely mindful of going forward is the weight of argument over the fragile nature of the consumer against the efforts and measures put into place to tackle the problem. Something might give at some point, but we have to make that call nearer the time.

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