Stocks, Gold continue higher

The stock indexes continued higher today. All trends are showing strong momentum, as the CCI is staying over the bullish plus 100 line on the Dow, S&P, and Nasdaq 100. The only negative is that volume is very light. Another negative for Dow Theory watchers is the failure of the Transportation average to confirm the new highs being made in the Dow Industrials.
dowtran.png
The above chart shows the new highs in the Dow, in the upper part of the graph, and the failure of the transports, in the lower sub-graph, to also go to new highs. This is not a specific signal of a turn-around, however, it can be viewed as a warning. Bulls will say this time is different, and a confirmation of the transports is an old and tired idea that is no longer of any forecasting value. I can slightly agree. It seems that much of the current rally is being influenced by the falling dollar, commodity price advances, and the need for materials to feed China’s perceived booming economy. It might be more informative to view transports as dry shipping rates, which is greatly influences by China’s needs, rather than general transportation in the US.
balticdryindex.png
The above chart shows the Baltic Dry Index. This transportation index tracks shipping costs of grains, metals, cement, coal, and many other raw goods, excluding oil (which isn’t too dry), and is greatly influenced by trade with China. This index is largely absent speculative content and it is not a tradeable contract, although it is a foreign index quoted here in dollars, so part of the sharp rise can be attributed to the falling dollar, which has speculative content. Also, part of the increase in shipping costs can be attributed to the shortage of serviceable ships, as many ships are past their useful life and in need of replacement.
This index has been in an exponential rise. Check out this web site: http://investmenttools.com/futures/bdi_baltic_dry_index.htm
The first chart, and the one I reproduced above, is the raw index with a moving average, showing the huge move it is now making. There are many other charts showing this index in relation to other markets. The last chart shows this index in relation to the FXI China ETF. They have been in near perfect sync lately. Since this index is a good indicator of future economic growth and production, it seems it would be well worth keeping an eye on it to possibly give a clue when the great China bubble might pop, or if it will indeed go straight up to the moon as most are predicting. Many markets will be affected if the China bubble pops, or even slows down. I plan to do an article on the Baltic Dry Index in the next few weeks, and will post on this blog any changes in the index. I’m currently getting the data into my charting software.
Gold was also higher today, following the down-move yesterday.