Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Why Most Investors LOST Money by Investing in ARK FUNDS - 27th Jan 22
The “play-to-earn” trend taking the crypto world by storm - 27th Jan 22
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

GOLD:CRB The Most Important Chart

Stock-Markets / Financial Markets 2010 Jun 02, 2010 - 02:01 AM GMT

By: Brian_Bloom

Stock-Markets Best Financial Markets Analysis ArticleRight now, in my view, the chart below is the most important chart in the book. It is a distilled proxy for investor confidence, world-wide, in the integrity of the financial system.

The ratio of the gold price to the commodities index can be found at http://stockcharts.com/h-sc/ui , courtesy stockcharts.com. When the chart comes up on your screen, enter the following in the space marked “symbol” $GOLD:$CRB





If this chart breaks to new highs (above 5) then it will be evidence of a vote of confidence in gold versus commodities – i.e. that the investment world is no longer viewing gold primarily as a commodity.

Personally, I prefer to view the market from a distance – by making use of weekly and monthly charts. The weekly chart below shows a 3 year view.

One should not try to second guess whether it will or will not break to new highs. Clearly, there is more at stake now than at any time since the World Depression and the world’s Central Bankers will do everything in their power to prevent such a break out.

But one should also recognize that if there is a breakout to new highs in the above chart, then this will likely be accompanied by a breakdown of the Dow Jones Industrial Chart, which is a proxy for underlying expectations of “future” direction of the US economy.

The chart below, of the $INDU (DJ Industrial Index) shows a severely oversold position and the “possibility” that the market may bounce up from here.



The “hopeful” technical indicators on the above chart are:

The RSI oscillator is standing at 36.24 (the market usually experiences support at this level)
The 45 day moving average is above the 200 day MA
The MACD oscillator appears to be wanting to “tick” up

Unfortunately, when one takes a step back and one looks at the weekly chart (see below), one sees a weekly oscillator that is not yet oversold, and one sees an MACD chart which is evidencing a non confirmation of “falling tops” relative to the rising tops in the Index Chart itself.

What this means, (on a balance of probabilities) is that if there is a bounce it will likely be temporary.



On the daily chart of the DJIA, the thing to watch for is a cross over of the 45 day Moving Average below the 200 day MA. If that happens it will probably represent the last “sell” signal before the emergence of the Primary Bear Market.

Once again, one should not try to second guess the outcome here. There is too much at stake. If that sell signal manifests, it will likely represent evidence of the commencement of an unwinding of the entire financial system – for which there is no historical precedent.

In years gone by we could hope for the economy to heal itself in time. Now, because of the humungous amounts of debt and derivatives in the system, there will be no self healing. It will be necessary to tear the old building down and build a new one, from the foundations up and starting with a new energy paradigm/s to replace fossil fuels, the internal combustion engine and coal fired power stations.

The chart below, courtesy Bigcharts.com, shows the same picture as above, but from the perspective of a decade of history and on logarithmic (percentage movement) scale


Explanation:

I have highlighted the relevant non confirmation of rising tops in the Index Chart and falling tops on the MACD oscillators (MACD = Moving Average Cumulative Differential – which reflects the distance between the 12 week and 26 week Moving Averages, in this case). When the blue line is pointing down, it shows that the 12 week MA is approaching the 26 week MA (bearish). By contrast, if the blue line is pointing up then it shows that the 12 week MA is approaching the 26 week MA on the upside (bullish).

When the blue line crosses over the red line (the 9 week MA of the Blue line) it reflects a technical sell signal if this happens from an overbought situation – which, in this case, it did a few weeks ago – AND FOR ONLY THE THIRD TIME IN TEN YEARS. (I drew the reader’s attention to this when it happened at that time). The previous times were:

In 2004. This was followed by two years of sideways movement on the Index itself
In mid 2007. This was later followed by the market crash of 2008
A few weeks ago.

Arguably, to use a baseball analogy, a few weeks ago we witnessed “strike three”.

The reader’s attention is now drawn to the red line of the RSI oscillator. This oscillator is more meaningful when one looks at its peaks and troughs (a peak is typically followed by a pullback and a trough is typically followed by a rise in the mother indicator – in this case the Industrial Index). In this case I want to draw the reader’s attention to the fact that the index recently penetrated below the horizontal halfway line between the peak of 80 and the trough of 20. Of course, it might bounce up from here (because it is oversold) or it might continue going (because a downside penetration shows relative weakness). There are no rules as to what will happen but, because of “strike 3”, in my view, the odds favour a continuation to the downside.

Having said all this, it cannot be stressed sufficiently strongly that one should not try to second guess the outcome here. There is too much at stake. It is probably more sensible to think in these terms: Based on fundamentals, the market is overvalued. Investors should not be invested in anything other than special situations where the entry price represents value for money in terms of anticipated underlying earnings, regardless of the state of the economy.

Now, just by way of a reality check, one should bear in mind that all of the above is in respect of investor expectations of the future.

The chart of the Baltic Dry Index below (courtesy http://investmenttools.com/futures/bdi_baltic_dry_index.htm ) reflects what is actually happening regarding the tempo of world economic activity. The Baltic Dry Index is a proxy for this and it appears to be encountering some resistance at the first yellow line (the June 2009 top). It also still needs to overcome the resistance of the second yellow line (the November 2009 top) before anyone can claim that the tempo of “actual” business activity is in a confirmed rising trend.



In clear language, if the Baltic Dry Index rises above the second yellow line then this will represent confirmation that the “green shoots” flowing from Central Government stimulation following the September 2008 crash have taken root. By contrast, if the Index falls below the rising dotted trend line, it will very likely indicate that the central governments’ attempts at stimulation have failed.

Based on my understanding of economic theory, there was never any question: The attempts at stimulation were never going to succeed. They were implemented against a background mindset of politicians attempting to protect their entrenched power positions and the positions of the financial and industrial backers. In conceptual economic terms, they represented “mal-investment”.

Conclusion

Whilst the fat lady has yet to sing, the party is over. If, in your cups, you insist on hanging around to hear the fat lady sing then you may still find some dregs in the punch bowl. Typically, there is no fun in that. It’s better to go home and sober up. There will be a lot of repair and reconstruction work to be done before we can start thinking about our next party.

By Brian Bloom

www.beyondneanderthal.com

Once in a while a book comes along that ‘nails’ the issues of our times. Brian Bloom has demonstrated an uncanny ability to predict world events, sometimes even before they are on the media radar. First he predicted the world financial crisis and its timing, then the increasing controversies regarding the causes of climate change. Next will be a dawning understanding that humanity must embrace radically new thought paradigms with regard to energy, or face extinction.

Via the medium of its lighthearted and entertaining storyline, Beyond Neanderthal highlights the common links between Christianity, Judaism, Islam, Hinduism and Taoism and draws attention to an alternative energy source known to the Ancients. How was this common knowledge lost? Have ego and testosterone befuddled our thought processes? The Muslim population is now approaching 1.6 billion across the planet. The clash of civilizations between Judeo-Christians and Muslims is heightening. Is there a peaceful way to diffuse this situation or will ego and testosterone get in the way of that too? Beyond Neanderthal makes the case for a possible way forward on both the energy and the clash of civilizations fronts.

Copies of Beyond Neanderthal may be ordered via www.beyondneanderthal.com or from Amazon

Copyright © 2010 Brian Bloom - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Brian Bloom 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