Commodities – 20-Year bear market in play?

joefridaycommodityrepeatingpatternjuly31

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This chart looks at the Thompson/Reuters Commodity Index on a monthly basis for the past 50 years

The index took off in the early 1970’s and rallied over 200% in a little over a decade at (1). Then it created a potential double top. What followed at (2)? An unwinding of the rally that lasted nearly 20-years, taking it to the bottom of its rising channel.

In the early 2000’s, the index took off again, gaining over 250% in a decades time at (3) and the rallied looks to have ended in 2011, as it was hitting the top of this long-term rising channel.

Since hitting the top of the channel the index has been pretty soft, losing nearly 40% of its value in the past few years.

Could commodities be pulling a repeating pattern again and be soft for a long period of time?

Joe Friday, just the facts….If you are like me, its hard to believe that commodities could be in a 20-year bear market again. What is happening to the index at this time looks like the trend will continue, as the index could be breaking triple support at (4) right now. If it does break down through triple support, it would suggest the down trend in this space continues!

 

 

Travel indicator being put to critical tests

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The American Economy is driven a good deal by the consumer.

The table below reflects that nearly 70% of GDP is based consumption.

consumptiontablejuly27

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The 4-pack below looks at consumption with a focus on the travel and leisure sector, by looking at Avis (CAR), Hertz (HTZ), Expedia (EXPE) and Priceline (PCLN).

carrentaltravel4packonsupportjuly28

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While many seem to be occupied by the news about rate hikes or the current developments from Greece, I wanted to share today four companies that might send a price message about consumption in the travel & leisure sector.

As you can see all four are testing support lines that have been around for a while. The car rental companies are weak of late, with Hertz breaking below a 5-year support line and Avis is at a similar support line.

Expedia and Priceline are also testing support lines that have been in play for the last four to five years.

What these four companies do in the near future could give us some insight to the health of the consumer going forward, which could tell us something about the state of the macro economy and how the broad market might do going forward.

 

 

Be aware of these surroundings friends!

nasgoogbiotltbeawareofsurrondingsjuly27

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It could pay to be “aware of these surroundings!”

(1) – Nasdaq Composite Index is back at 2000 highs, with little wiggle room at the top of this rising wedge pattern

(2) – Google shot up after earnings two weeks ago hitting a resistance line based upon its 2007 highs and a 161% Fibonacci extension level, where it made a reversal pattern.

(3) – Red hot Biotech (IBB) is at the top of this rising channel and created a potential reversal pattern with support just below current prices.

(4) – TLT declined, hitting its 38% retracement level and of late is breaking above this bullish falling wedge.

shanghaishorttermsupportbreakjuly27CLICK ON CHART TO ENLARGE

Shanghai Index had a rough June, declining over 20%. This month a sharp counter trend rally has been taking place and the rally took it almost to its 50% retracement level. Today the Shanghai index broke short term support as it declined 8% in a day!

When you look at these patterns in stocks and bonds, it might pay to be aware of your surroundings because it would take little price action to break several support lines at the same time!