A Profound Change Has Come Over The Markets
The following is part of Pivotal Events that was published for our subscribers March 10, 2011.
Signs Of The Times
"As a lifelong resident in Beijing preparing for retirement, Lupin Yanju followed the lead of thousands of other investors hoping to insulate themselves against volatile stocks and low-return bank accounts: She invested her savings in property." ~ The Globe And Mail, February 28, 2011
"Copper-Plated Mergers" ~ Financial Post, March 1, 2011
Corporate mergers and takeovers seem to happen close to cyclical highs for metal prices, rather than at the lows. This eruption reminds of the party in the 1980 boom. The street discovered that crude oil was invulnerable to cyclical forces and assumed as much for base metal prices. Banks lent to big oil companies so they could take over mining companies. There was a takeover offer for Amax, the huge molybdenum producer at around 70. The board of directors thought it was too low and refused the deal. The stock eventually declined to 10.
"Emerging markets could propel a global boom comparable to the industrialization of the United States." ~ Wall Street Journal, March 2, 2011
It looks as if the financial markets are already celebrating this.
"Farmland Booms Again" ~ Financial Post, March 4, 2011
The Party Is At ??
On timing, the financial party could be at Five-Past-Midnight, but perhaps the band will play until One AM? [This was written yesterday and the band is packing up and retiring.]
At any rate, the action was likely to reach a peak in a six-week window, centered in March. Although we have been calling it the All-One-Market phenomenon for a couple of years, as it matures not all sectors would peak at the same time. Gold, silver and crude oil would likely run the longest.
Since February 18th we have been watching for stocks to lead the top in commodities, which is typical of a cyclical peak.
This is working out.
Base metal mining stocks (SPTMN) set their high at 1600 on February 8. The initial decline was to 1487 and the rebound made it to 1487 on Friday. That has been taken out at 1371 and that sets a downtrend.
Enthusiasm for agricultural prices continues, but agricultural stock prices are looking elsewhere. The COW (trades on Toronto) set its high at 24.60 on February 14th. The first drop was to 22.94 and the rebound made it to 23.72 - also on Friday. That has been taken out with the slide to 22.70.
Oil and precious metal stocks continued to rise until a few days ago.
This should not be considered as leadership. Quite likely it is lagging the action in agricultural and base metal mining sectors.
The general commodities index (CRB) set the highest weekly RSI (81.5) since 2008. This has rallied from 200 in March 2009 to 363 on Friday, which compares to 473 at the cyclical high in 2008. The sector is vulnerable to the next cyclical bear market.
Within this there have been some instructive failures.
The best performers at the moment are sugar and soybeans. The former working on a big head and shoulders top. The latter have been doing poorly.
Rice, wheat and copper have broken down. Cocoa has fallen off a cliff.
Heating oil has registered an Upside Exhaustion and is now vulnerable to the profound change that started this week.
Link to March 11, 2011 'Bob and Phil Show' on Howestreet.com: http://www.talkdigitalnetwork.com/2011/03/band-stops-playing-party-ends/