• 658 days Will The ECB Continue To Hike Rates?
  • 658 days Forbes: Aramco Remains Largest Company In The Middle East
  • 660 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 1,059 days Could Crypto Overtake Traditional Investment?
  • 1,064 days Americans Still Quitting Jobs At Record Pace
  • 1,066 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 1,069 days Is The Dollar Too Strong?
  • 1,070 days Big Tech Disappoints Investors on Earnings Calls
  • 1,070 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 1,072 days China Is Quietly Trying To Distance Itself From Russia
  • 1,072 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 1,076 days Crypto Investors Won Big In 2021
  • 1,077 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 1,077 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 1,080 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 1,080 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 1,083 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 1,084 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 1,084 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 1,086 days Are NFTs About To Take Over Gaming?
  1. Home
  2. Markets
  3. Other

Long Term Scale

As I mentioned in my previous notes, I interpret the markets through a variety of sliding scales within my research. I thought I might construct a bit of the broader scale to color some of my longer term rationale - which continues to be constructively bullish. I have always appreciated the elegance of charts because for me they contextualize market conditions better than conventional description.

Perhaps it's just my impatience.

I do believe the more than decade long commodity bull market is drawing to a close. While although that is historically brief compared to the previous three (averaged approximately 17 years in duration), when market conditions that have supported the cycle abate - its number is up. The following two charts make that argument rather strongly.

The CRB index is exhibiting very similar price structure to the end of the last commodity cycle as described in the historic commodity chart from Hackett Financial Advisors. In fact, this cycle has yielded the steepest and quickest rise in commodity prices in the past 200 years. It is loosely the same argument I described against silver (Y2K=QE2).

As in 1983 we appear to be putting in the right shoulder of the head and shoulder top for the CRB index. The Hackett chart has a different weighting than the more energy-centric CRB index. Interestingly, this dynamic is congruent to technical conditions in 1983.

 

Reuters/Jefferies CRB Monthly Index
Larger Image

The dollar continues to follow the early 1980's bottom. The market will eventually break loose of the inverse correlation that has existed between the SPX and dollar since 2003.

It has in the not too distant past - it will again overlap in trend.

 

Silver vs US Dollar Chart
Larger Image

As we approach the end of QE2 and embark on a transition (granted likely glacial) to what should become a less accommodative monetary policy - I reference my The Congruent Market Theory.

 

The Congruent Market Theory
Larger Image

Considering that in the past decade we have experienced our fair share of the boom and bust cycle, I like to look at a market that was not disproportionately weighted to those two sectors (technology & financials). The Russell gives you that view because of its micro-weighted slices across the broad economy. While although there were serious retracements in the past, the long term secular bull market is still alive. That is plainly represented in the long-term chart by higher highs and higher lows. You will find the same price structure looking at the MSCI Word Index.

I tend to stay away from the semantic debate over secular and cyclical markets, because in most instances they have allowed traders and investors dogmatic cover that typically wasn't warranted to the same degree they expected.

 

Russell 2000 Monthly
Larger Image

These charts represent components within my longer term analysis. The next series will be constructed using the more agnostic view of the short to intermediate-term.

 


Disclaimer: (Positions in TNA & UUP)

 

Back to homepage

Leave a comment

Leave a comment