Even longer forecasting power, is called “Orders Received” or “Bookings.” It leads all other series in the business cycle. Why should it not? Order must be booked by the salesman before goods can be made in the factories, or receivables financed by the banks. Naturally, orders move first, business volumes next and interest rates last.
Stock prices only do their best to keep up with orders.
If everyone, from customer to salesman and from sales-manager to president, is looking for a chance to make money in the stock market, then enough stock may be bought or sold today for the ticker to disclose now the change that took place in bookings yesterday.
If not, and if insiders are lethargic, then several weeks may have to pass before word will circulate that business is going to be better or worse, and several weeks, therefore may elapse before stock prices turn up or down.
Booking more often lead than follow stock prices and that bookings are a better forecaster of stock prices than are either the rate of operations or the price of scrap, two other well-regarded business indices.
“Separate and distinct things not to be confused, as every thoughtful investor knows, are real worth and market price. […] Our problem, therefore is twofold: to explain the price as it is, and to show what price would be right.”- John Burr Williams