Hemline indicator: Fashion Week forecasts falling stocks

Could investors gain more insight on the market's future trend from the runway models in Bryant Park than the analysts on Wall Street? Charles Payne notes,"New York City is currently filled with fashionistas from all over the planet who, for the next few days are congregating at Bryant Park for their bi-annual Fashion Week."

The editor of Wall Street Strategies notes, "While this event may seem as far removed from financial markets as possible, there is a seemingly positive correlation between what happens here that ultimately affects us all as market participants."

As the advisor notes, that the hemline length of the various women's collections has been cited for its ability to predict the direction of the economy. He explains, "Steeped in history, the hemline theory as it is known, dates back as far as the 1920's, and holds that high hemlines suggest a strong economy and higher stock prices while the opposite is true for longer hemlines."

While many might argue that this "indicator" is coincidental or plain folly, others believe that, psychologically the optimism or pessimism of society in general can be seen in such trends.

So what do today's fashion trends portend? Payne notes, "It appears that for most of the designers who have shown thus far, their Spring of 2008 offerings are chock full of floor length hemlines."

He continues, "Whether or not this is rather unconventional market indicator should be solely embraced as debatable at best. However, it can be incorporated as another tool in a comprehensive investor toolkit and be used as part of an early warning system for any impending risk."

[photo Peter Duhon]

Each day, Steven Halpern's TheStockAdvisors.com features the latest investment ideas and market commentary from the financial newsletter community.