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Tuesday, April 16, 2013

Does it finally matter?

You have probably heard the old saying it does not matter in the markets until it matters.  I think yesterday was a sign it matters now.  I have written a number of times this year about the warning signs in the global economy like the break down in copper and other industrial metals.  They clearly have warned for months now.  I guess it took weaker then expected data on the Chinese economy for people to actually believe it.  Check out the number of new highs/lows chart.

Quite the spike up in new lows today.  Way more then any other day since the Nov. low.  We also had the most negative breadth today since then.  The market was serious about the down side.  Lets look at copper again.

Despite the big move down in copper already, it tanked again today.  However, I think this next chart may be a real clue it is different now.  Check out the chart of FXA (Australian dollar).

This currency often moves up and down with commodity prices.  It pulled back some earlier in the year, but then rallied strongly while commodities in general did not.  Today it was down big on very heavy volume.  Is this starting to confirm the move down in the industrial metals?  I think it is well on its way to doing that.

The world has been partially in a risk off phase for months.  Some markets have been ignoring signs of global weakness and kept pushing higher.  It looks like the game changed on 4/15.  We may be starting a global risk off phase now.  Upcoming earnings reports will likely be the key to what happens next.


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