July 21, 2015

The Economy and a Look At Major Indices

The dust is settling around the technology giants like Amazon and Google runs. So let's see what we have going on in the major indices. Let's take a peek at the Baltic Dry Index too.

I was listening to a radio program the other day and the guest was a perma-doom and gloomer. The only bad thing he could come up with on the economy was that commodity prices are falling. He said the recent weakness in oil and copper are leading indicators of growth. He failed to comprehend that oil is traded in US Dollars globally and pretty much all of any particular commodities movement is directly inverse of the dollar. Yes, the dollar is rebounding lately. So there you have the reason commodities are falling off. I suspect the strength of the dollar is on the back of the FED's latest news on rates.

The recent gains put up on the Nasdaq Index are looking like the index is in need of a cooling off. Looking pretty overbought. Especially in RSI 2. Biotech IBB is overbought as well. On the other indices like the S&P we are at resistance levels. Small-caps (Russell 2000) are not even running much nor bullish looking. Something has got to give on these indices because they will mimic each other eventually. This is because they are mostly determined by futures contracts. Yes futures contracts control the market.

Let's look at some charts. First is the Nasdaq itself. Looking very overbought. Vertical actually!! Needs to settle down. Doji candle printed today. Another trend reversal indicator. I circled the RSI and doji.
















Biotech IBB is pretty much an identical chart except it has broken out a little more and is hanging even more overextended. It's such a bullish chart breakout though I don't know how much of a pull-back it will see. Same goes for the Nasdaq. I very well could be wrong and everything rips higher. Technically everything looks due for a pause atleast.



















The Baltic Dry Index is running lately. I'm not convinced it is going to continue as it has had similar runs and corrections on trend. The trend is down. This could be the top of the downtrend as I drew on the chart below. We shall see shortly.

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