Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
This Invisible Tech Stock Threatens Amazon with 800,000+ Online Stores - 21st Nov 19
Crude Oil Price Begins To Move Lower - 21st Nov 19
Cracks Spread in the Precious Metals Bullion Banks’ Price Management System - 21st Nov 19
Why Record-High Stock Prices Mean You Should Buy More - 20th Nov 19
This Invisible Company Powers Almost the Entire Finance Industry - 20th Nov 19
Zig-Zagging Gold Is Not Necessarily Bearish Gold - 20th Nov 19
Legal Status of Cannabis Seeds in the UK - 20th Nov 19
The Next Gold Rush Could Be About To Happen Here - 20th Nov 19
China's Grand Plan to Take Over the World - 19th Nov 19
Interest Rates Heading Zero or Negative to Prop Up Debt Bubble - 19th Nov 19
Plethora of Potential Financial Crisis Triggers - 19th Nov 19
Trade News Still Relevant? - 19th Nov 19
Comments on Catena Media Q3 Report 2019 - 19th Nov 19
Venezuela’s Hyperinflation Drags On For A Near Record—36 Months - 18th Nov 19
Intellectual Property as the New Guild System - 18th Nov 19
Gold Mining Stocks Q3’ 2019 Fundamentals - 18th Nov 19
The Best Way To Play The Coming Gold Boom - 18th Nov 19
What ECB’s Tiering Means for Gold - 17th Nov 19
DOJ Asked to Examine New Systemic Risk in Gold & Silver Markets - 17th Nov 19
Dow Jones Stock Market Cycle Update and are we there yet? - 17th Nov 19
When the Crude Oil Price Collapses Below $40 What Happens? PART III - 17th Nov 19
If History Repeats, Gold is Headed to $8,000 - 17th Nov 19
All You Need To Know About Cryptocurrency - 17th Nov 19
What happens To The Global Economy If Oil Collapses Below $40 – Part II - 15th Nov 19
America’s Exceptionalism’s Non-intervention Slide to Conquest, Empire - and Socialism - 15th Nov 19
Five Gold Charts to Contemplate as We Prepare for the New Year - 15th Nov 19
Best Gaming CPU Nov 2019 - Budget, Mid and High End PC System Processors - 15th Nov 19
Lend Money Without A Credit Check — Is That Possible? - 15th Nov 19
Gold and Silver Capitulation Time - 14th Nov 19
The Case for a Silver Price Rally - 14th Nov 19
What Happens To The Global Economy If the Oil Price Collapses Below $40 - 14th Nov 19
7 days of Free FX + Crypto Forecasts -- Join in - 14th Nov 19
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19

Market Oracle FREE Newsletter

$4 Billion Golden Oppoerunity

No Sign of an Economic Recovery Yet? Look Again at BDI, Copper and Homebuilders

Stock-Markets / Financial Markets 2009 Feb 17, 2009 - 06:26 AM GMT

By: Donald_W_Dony

Stock-Markets Best Financial Markets Analysis ArticleThere are a number of early economic signals that are beginning to slowly surface that has not yet caught the attention of financial media. These slight changes to the commodity, bond and equity markets are the early indicators and building blocks of the next economic recovery. Throughout 2009 additional evidence is expected to gradually surface. Here are some of the most recent pieces of the recovery puzzle


The home builders sector (Chart 1) represents a parallel to leading indicator to the U.S. housing market. As this market was the root cause of the financial crises, any stability in the home builders sector would provide an important clue to a possible bottom in the deeply depressed American housing market. More than three years since the market began correcting, inventories are now flattening, prices are coming back down to earth, and sales are approaching stability. The peak in the U.S. housing market occurred in the second half of 2005, whereas the top in the home builders sector developed in May 2005.
Technical models indicate that renewed upward pressure should develop over the next six weeks. This is encouraging especially since the sector has already found stable price support since November.

The price movement of Copper (Chart 2) is a vital indicator to the economy for this metal moves with the business cycle. After the waterfall collapse in the second half of 2008 from $4.00 to $1.25, copper appears to be finding a floor and good price support at the $1.40 to $1.60 range. With the enormously wide application use of copper in areas such as consumer electronics, plumbing, computers, industry and homes building, price firmness for this metal indicates building strength in the global economy.

The Baltic Dry Index (Chart 3) is another economic gauge that is displaying some returning life. The BDI is a number issued daily by the London-based Baltic Exchange. The index provides an assessment of the price of moving the major raw materials by sea.

The index covers dry bulk carriers carrying a range of commodities including coal, iron ore and grain. This index fell from over 11,000 at its peak in early 2008 to a dismal 700 in December. Some of the reasons for the advance are the slow unfreezing of credit and the decline of the iron ore stockpiles in China.
Technically, the index still remains down but is currently establishing a base. Only an advance over the 2000-3000 resistance level would suggest a reversal has begun.

The growing stability in base metals is another early sign of the recovery. Zinc, nickel and lead are all forming solid price bases for the first time since early 2008. Zinc, in particular, began to recover back in September, over five months ago.

There is also a slow but gradual shift out of consumer staples and into select consumer cyclicals. For the first time in over a year, the relative performance of both sectors is now equal. Bull markets require the consumer to move their funds out of the safety of staples and into discretionaries. Models are suggesting that this transfer is starting.

Other pieces of evidence include the calming of the Volatility Index (VIX), the narrowing of the TED spread and changing yield curve in the bond market.
Though many of these elements are relatively minor in their context, they are the silent building blocks for the next economic recovery and bull market.

Additional research can be found in the February newsletter. Go to www.technicalspeculator.com and click on member login.

Your comments are always welcomed.

By Donald W. Dony, FCSI, MFTA
www.technicalspeculator.com

COPYRIGHT © 2009 Donald W. Dony
Donald W. Dony, FCSI, MFTA has been in the investment profession for over 20 years, first as a stock broker in the mid 1980's and then as the principal of D. W. Dony and Associates Inc., a financial consulting firm to present.  He is the editor and publisher of the Technical Speculator, a monthly international investment newsletter, which specializes in major world equity markets, currencies, bonds and interest rates as well as the precious metals markets.   

Donald is also an instructor for the Canadian Securities Institute (CSI). He is often called upon to design technical analysis training programs and to provide teaching to industry professionals on technical analysis at many of Canada's leading brokerage firms.  He is a respected specialist in the area of intermarket and cycle analysis and a frequent speaker at investment conferences.

Mr. Dony is a member of the Canadian Society of Technical Analysts (CSTA) and the International Federation of Technical Analysts (IFTA).

Donald W. Dony Archive

© 2005-2019 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

6 Critical Money Making Rules