Chaos reigns – and not only in the markets
Once in a while, national politics is gripped in a major drama. But not only is that in evidence in the UK with the Shakespearian Fall of Boris, but also in the USA. The resignation of Boris was preceded by multiple resignations of cabinet ministers and others down the chain to trigger his downfall. Little noted: the same phenomenon is happening in the White House with mass resignations (largely for the same reason – sleaze and drift and a leader prone to gaffes (sound familiar?)).
There seems to be an overwhelming lack of confidence that politicians can stop the rot And now the EU has agreed to re-classify Natural Gas (over 90% methane which is the most potent ‘greenhouse gas’!) and Nuclear as now officially ‘Green’. Of course, this is an expedient to keep the European lights on this winter with little gas arriving from Russia. And has the true blue ‘greenies’ furious at this betrayal.
Memo from Greta: “How dare you!”
This all fits in with a rudderless West in decline. In the UK and USA, the reputation of politics and politicians has hit all-time lows – and that is saying something. And that in turn fits in with the ongoing major bear market in assets despite occasional bear market rallies.
And we are currently seeing such a bear market rally, very weak though it is with trading volumes lower and advance/decline ratios likewise weak.
But – and this is a big but – commodities that have been hit very hard from June and into this month appear to be signalling they are poised for a massive recovery phase. If so, this will signal a growing economy.
Commodities are down, but certainly not out
From Crude oil to NatGas to Copper to Wheat to Lithium to Aluminium, markets have suffered major corrections. Of course, the bullish fervour on display earlier had pushed most markets to severe over-bought levels where hedge funds had become over-extended (as they usually do as they chase trends believing they will continue for ever).
For instance here is Aluminium – an essential metal in the composition of car batteries and bodies
The decline off the March peak at 4100 is in a clear five impulsive waves that has carried to 2300 which is the Fib 62% retrace of the entire bull run off the May 2020 Corona Crash low.
But note the huge mom divs here on the daily which sets up the very likely recovery in a three wave pattern with my main target in the 3000 region.
And this chart setup is repeated in the Dr Copper chart (remember, Copper is reputed to have a PhD in economics!). Basically, as Copper goes, so goes the economy.
And here is the FTSE 350 Mining index
Mining shares have literally collapsed (Anglo American is off 40% with the juniors off even more) from the February 2021 peak and have slightly overshot the Fib 76% retrace but on a massive mom div.
All of the commodity charts I follow are displaying massive mom divs – and that is a sure sign selling pressure is weakening and smart money is coming into these markets. In other words, a huge re-distribution of share ownership is in progress.
In terms of Copper sentiment, bullish MSM articles are pretty thin (to non existent) on the ground. When markets were making new highs almost daily and when very comments started to appear in the headlines, I took that as a signal to expect a major Copper top. That occurred.
Base metals barely get a look-in in the financial press but when they do, something significant is about to happen.
Just yesterday, there is an explosion of mainstream articles highly bearish on copper. Here are some:
Copper prices hit a two-year low but may not have reached bottom yet
Recession alarm – copper prices are sinking. And that’s big trouble
Remember, journalists only highlight a trend when it has lasted a while and is thus about over. But they only reflect what the herd is thinking – and at major turns, that herd comprises the vast majority.
And here is another major commodity that has plunged to the significant Fib 62% retrace – Cotton
Incidentally, isn’t it curious that so many unrelated markets should show the same basic patterns with declines to a major Fib level around the same time? So are markets moving randomly as so many conventional analysts maintain?
And here is another unrelated market – Wheat
I posted this roadmap to my members on Thursday morning and on Friday, the market jumped by 50 cents right on cue to kick off the recovery phase.
So, if commodity markets are due a sharp recovery as the charts suggest, where does that place the commonly held forecasts for a recession ahead?
And where does that place my forecast for a resumption of the share bear market in the near term? Hmm.
Stock Indexes are at another crossroads
The Nasdaq index of many of the high tech companies has been the leader on the way up and also on the way down, as I forecast. It has been following my roadmaps pretty much all the way down of an impressive 34% decline from the highs set late last year to the June 16 low.
But from there it has staged a partial recovery but on Friday, has poked slightly above my upper tramline
and that sets up the option to advance higher to the pink resistance area around 13,000. And after that? Hmm again.
Of course, this bounce could turn out to be a simple a-b-c with the current up-move the ‘c’ wave that could peter out this week.
But if not, We should see a move up to test the pink resistance. And any move below the 11,000 area would firm up my original wave 3 of 3 down option.
And with the sentiment of retail investors at a very low ebb, a further push higher would not surprise me. The recent bounce is in line with the usual post-July 4 seasonal tendency as much share buying usually occurs in this period. But trading volumes have been low which implies the seasonal bounce may be over soon when this buying is absorbed (unless a new buying surge appears)
As ever, I will let the charts do the talking, not the pundits.