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Wednesday, May 16, 2012

Global economy

There has been a lot written in recent years about how the BRIC (Brazil, Russia, India, and China) nations have become the engine of growth for the global economy.  That was definitely true going into the 2007-8 time period.  Lets have a look at the current monthly chart of a BRIC based ETF EEB.

That was quite a run up in 2007.  I think that qualifies as a parabolic move up.  Kind of looks a bit like the NASDAQ back in 1999 and early 2000.  The bear market in 2008 wiped out that parabolic move.  That was very similar to what happened to the NASDAQ in 2001-2.  Back in March of 2009, while the U.S. market was making new lows, we can see this ETF made a higher low.  It was showing relative strength to SPX and had a very nice rally through the rest of 2009.  It made more new bull market highs in 2011, but look at it now.  This is a serious negative divergence with SPX this year.  Clearly the BRIC economies are struggling and if they are leading the global economy anywhere it would be down.

Copper is used in just about everything made today so it is a good economic indicator.  It is such a good indicator it is often referred to as Dr. Copper as in PHD in economics.  Check out the monthly chart of JJC an ETF for copper.

I can't say it looks any better then the BRIC ETF.  So far this month it has taken out the lows of the last 3 months.  It looks more likely to head down from here then up.

One last chart is a world stock index based ETF VT.  Check out its monthly chart.

Just like JJC it has taken out the lows of the last 3 months.  It looks a little bearish to me also.

The risk of the global economy continuing to slow appears to be high when you look at these charts and think about what is going on in Europe.  If that happens it will have a negative affect on our corporate profits and SPX itself.


1 comment:

Parviz said...

Bob, very insightful observation. I would really like for you to look at transportation, and share your wisdom with us.Thanks,


The information in this blog is provided for educational purposes only and is not to be construed as investment advice.