Best of the Week
Most Popular
1.North Korean Chinese Proxy vs US Military Empire Trending Towards Nuclear War! - Nadeem_Walayat
2.Researchers Find $10 Billion Hidden Treasure In A Dead Volcano - OilPrice_Com
3.Gold and Silver : The Battle for Control - Rambus_Chartology
4.Asda Sales Collapse and Profits Crash! UK Retailer Sector Crisis 2017 - Nadeem_Walayat
5.Deep State Conspiracy or Chaos - James_Quinn
6.The Stock Market Guns of August, Trade Set-Up & Removing your Rose Tinted Glasses - Plunger
7.Gold Stocks Coiled Spring - Zeal_LLC
8.Neil Howe: The Amazon-Walmart Rivalry Will Determine the Future of Retail - John_Mauldin
9.Crude Oil Price Precious Metals Link in August - Nadia_Simmons
10.Gold and Silver Precious Metals Nearing Breakout - Jordan_Roy_Byrne
Last 7 days
The Stock Market No Longer Cares About Trump - 21st Aug 17
The Coming Boom Of Productivity Will Get Our Economy Back On Track - 21st Aug 17
Buffett Sees Stock Market Crash Coming? His Cash Speaks Louder Than Words - 21st Aug 17
This Could Be The Biggest Gold Discovery In History - 21st Aug 17
Stock Market Correction in Full Swing - 21st Aug 17
Seeking Confirmations – US Stock Market - 21st Aug 17
The changing demographic of online gamblers - 21st Aug 17
Gold is a coiled spring… the breakout is here, fundamentals are in place, technicals are compelling - 20th Aug 17
A Midsummer Night's Dream: Buy Gold and Silver - 20th Aug 17
Gold Mining Stocks 2017 Fundamentals - 20th Aug 17
EIA Weekly Report and Crude Oil - 19th Aug 17
4 Insights for Adjusting Your Portfolio in a Rate-hike Environment - 19th Aug 17
Gold Direction Indicator - 19th Aug 17
Historical Inevitability and Gold and Silver Ownership - 19th Aug 17
You Are Being Lied To About “Low” Gold Demand - 19th Aug 17
This is Why Cocoa's Crash Was a Perfect Setup - 19th Aug 17
Gold, Silver Consolidate On Last Weeks Gains, Palladium Surges 36% YTD To 16 Year High - 19th Aug 17
North Korea Is Far From Being Irrational… It Has A Plan - 18th Aug 17
US Civil War - FUNCTIONAL ILLITERATES TRYING TO ERASE HISTORY - 18th Aug 17
Bitcoin Hits New All-Time High Over $4,400 As It Catches Paypal In Total Market Cap - 17th Aug 17
3 Psychological Ingredients behind Great Web Content - 17th Aug 17
The War on Cash - Rogoff, Orwell and Kafka - 17th Aug 17
The Stock Market Guns of August, Trade Set-Up & Removing your Rose Tinted Glasses - 16th Aug 17
Stocks, Bonds, Interest Rates, and Serbia, Camp Kotok 2017 - 16th Aug 17
U.S. Stock Market: Sunrise ... Sunset - 16th Aug 17
The Next Tech Crash Could Delay Your Retirement by a Decade - 15th Aug 17
Gold and Silver Precious Metals Nearing Breakout - 15th Aug 17
North Korea Showdown: Pivotal Market Turning Point - 15th Aug 17
Tech Stocks DOT COM Bubble Do-Over? - 14th Aug 17
Deep State Conspiracy or Chaos - 14th Aug 17
From the Trans-Atlantic Axis and the Trans-Asian Axis - 14th Aug 17
Stock Market Intermediate Correction Underway - 14th Aug 17
The Islamic State Jihadi Pivot to Asia - 13th Aug 17
Potential Pivots Upcoming for Stocks and Gold - 13th Aug 17
North Korean Chinese Proxy vs US Military Empire Trending Towards Nuclear War! - 12th Aug 17

Market Oracle FREE Newsletter

3 Videos + 8 Charts = Opportunities You Need to See - Free

Falling Commodities Prices Despite QE - What Does That Mean?

Commodities / Commodities Trading Jan 22, 2014 - 03:19 AM GMT

By: EWI

Commodities

During QE3, the latest round of the Fed's quantitative easing, the stock market rose. We all know that.

But did you also know that commodities fell?

That's right: QE3 had zero effect on commodities -- or maybe even a negative effect. In fact, an unbiased observer of the trend might conclude that the Fed drove commodity prices down.


That, of course, would be heresy to investors who believe that the Fed's actions have been inflating all financial markets.

What should you make of the fact that commodities have failed to respond to the massive, historic, unprecedented central-bank stimulus? We see it as a red flag.

What's more, you may be surprised to know that not one of the Fed's stimulus programs -- QE1, QE2 and QE3 -- pushed up commodity prices.

As Robert Prechter, the president of Elliott Wave International, wrote in his November 2013 Elliott Wave Theorist, "Charts tell the truth. Let's look at some charts." These four charts and analysis that he published in May, July, and November 2013 tell the story:

(Robert Prechter, July 2013 Elliott Wave Theorist)

The CRB index of commodities has been losing ground for more than two years, as shown in Figure 3. Notice the four short arrows on the chart. Based on their positions, you might think they would mark the timing of accurate sell signals generated by a secret indicator. But there's no secret indicator. These happen to be the times at which the Fed launched its inflationary QE programs!

Investors almost universally take news at face value rather than paradoxically as they should. So they believed the Fed's QE actions would be bullish for commodities. But -- ironically yet naturally -- every launch of a new QE program provided an opportunity to sell commodities near a high.

The first time the Fed bought a slew of new assets (QE0) was in 2008, and commodities went straight down during the entire buying spree.

QE1 (see below) was just a swapping of assets, not new buying, so it wasn't inflationary; ironically, commodities rose during this time.

Commodities rose a little bit after the inflationary QE2 started but ultimately went lower. Since QE3 and QE4 -- the two most aggressive programs of inflating the Fed has ever initiated -- commodity prices have been trending lower as well.

Are commodities just late and poised to soar? I don't think so. Figure 4 shows a chart of the CRB index published in The Elliott Wave Theorist back in May 2011.

It shows a three-step, countertrend rally ... inside of a parallel trend channel ... at a [Fibonacci] 62% retracement ... thus giving three reasons to expect a peak at that time. [Indeed] the CRB index has trended moderately but persistently lower since then.

Prechter gave another update in his November 2013 Elliott Wave Theorist:

Commodities are in a bear market. Figure 1 proves that the Fed's feverish quantitative easing (QE) -- i.e. record fiat-money inflating -- is not driving overall prices of goods higher.

The bear market in commodities began two months before the Fed's massive asset-buying program began. Despite the Fed's inflating at a 33% rate annually for five straight years, commodities are still slipping lower.

Prechter's final point from the November 2013 Elliott Wave Theorist summarizes it best:

None of the believers in omnipotent monetary authorities and their pledges to inflate saw any of those changes coming. Meanwhile, we couldn't see how it could turn out any other way.

The largest inverted debt pyramid in the history of the world is the reason that QE won't work. The future is already fully mortgaged.

15 Hand-Picked Charts to Help You See What's Coming in the Markets
Prepare for 2014 with a complimentary issue of Robert Prechter's Elliott Wave Theorist

Have you ever seen price charts that tell a story clearly? Prechter chose 15 charts to explain to his subscribers where the financial markets are headed in 2014. They cover markets like the S&P 500, NASDAQ, the Dow, commodities, gold, and mutual funds. With this information, they are now prepared to be on the right side of the financial markets. You can be, too, because, in a rare opportunity, we can offer you a look at the whole issue -- FREE.

Prechter says that "charts tell the truth." Here is your chance to see what truths these charts are telling. If a picture is worth a thousand words, then this latest publication is like reading more than 15,000 words of his market analysis.

Get your FREE 10 page issue of Robert Prechter's Theorist now >>

About the Publisher, Elliott Wave International
Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world's largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private investors around the world.


© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife