Copper and Dow Transports Indicators of World Growth
Simon Baker of Baker Avenue Asset Management said that copper and Dow Transports are leading indicators for world growth. His firm uses a proprietary index he called the 'Baker Ave Market Sentiment Indicator (BAMSI)'. This indicator is a basket of over 4,000 stocks, measuring momentum and market sentiment. Currently the indicator is negative.
From Yahoo Ticker: 20110924 Extract
Baker notes the performance of copper, or "Dr. Copper" as it's called by market pros for the base metal's ability to predict economic action. Typically when copper is moving higher, or at least stable over $4, the economy is in at least okay shape. Copper is down over 17% in September, currently sitting somewhere in the mid-$3.00's.
Another portent of ill are the Dow Transports (DJT), as evidenced by the FedEx' (FDX) horrific quarter and warning this week. "If people aren't shipping then people aren't buying," notes Baker. For Dow Transport traditionalists, weak transports mean a weak economy, which means bad things for stocks.
Here is the BAMSI to mid 2009.
Looks pretty good Simon Baker, but we like the better than 80% accuracy of cycles that one can find in Copper and Dow Transports.
Transports : Post July 14 2011 Trucks and trians carry the goods so we must watch the transports
Copper posted 03/31/2011 Copper Ominous Forecast
As of today copper has falled from $62 to $42 and Dow Transports have fallen from $5600 to $4200. Mr Baker should also add Hurst cycles to his tool chest, what do you think?
Learn more on Hurst Cycles here 'Jim Hurst method'