Baltic Dry Index Update, Stocks erase Friday gains and more

As I’ve noted here before, the Baltic Dry Shipping Index is often a good barometer of world economic activity and stock market trends. Sometimes it leads, sometimes it lags. In the previous comment on this index I noted a possible double top formation. It looks like that has happened. You can clearly see on the chart to the right of the daily Baltic Dry index the double top, and the confirmation when the support line in between the tops, where I put the yellow dashed line, was broken. Also, there was a clear divergence in the adaptive CCI in the lower sub-graph, marked with the blue line connected to the peaks. It is always possible that this index could try for a triple top. More likely would be a test of the break-down point at the yellow line.
The chart to the left is the same index standing back a bit to fit in more data. I put in a standard fibonacci retracement tool to show where logical support levels might be found. It has been quite a remarkable run in this index, along with the various dry shipping stocks, and of course the great China bubble. As I’ve noted in the past, part of the price advance of this index is due to the inverse relationship with the US Dollar, which is probably one of the most oversold markets in recent history and long overdue for a turnaround. Higher oil prices also play into the rise in this index, which of course is also quoted in US Dollar, but I think Gisele has been talking to Opec about changing that.
The stock indexes erased all of the gains in the shortened and thin session last Friday, and seem to be resuming their downtrends. I was hoping for more of a rally to relieve the oversold condition. The momentum indicator on the S&P has been see-sawing back and forth the last several days and is now back to the downside, and of course the downtrend is firmly in place. The Nasdaq is still holding slightly above the Nov 12th low, but looks like it wants to take it out. The trend indicator is also down and momentum has turned back to the downside as well.
The gold market has been interesting. The trend indicator went flat and momentum returned to the upside, which is now  climbing but in the overbought area according to the double stochastic. The bar today created a small upthrust (the little bar to the very right is the after-hours session). If momentum should turn back down it would appear that the last rally attempt to test the previous high will have failed. It’s too early to tell at this point. I good rally in the next day or so would invalidate that, with another leg up likely. A rally in the dollar would probably trigger a good down-move in gold, leaving that ominous double top. It’s just something to keep an eye on at this point.
I’ll have S&P and Nasdaq charts up tomorrow.

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