T2108 Update – The Baton Firmly Returns To The Sellers

T2108 Status: 45.1%
T2107 Status: 45.3%
VIX Status: 18.5 (jumped 24.5%)
General (Short-term) Trading Call: Hold. Caveats listed below.
Active T2108 periods: Day #37 over 20%, Day #35 over 30%, Day #32 over 40%, Day #1 under 50% (underperiod, ending 29 days over 50%), Day #5 under 60%, Day #107 under 70%

Reference Charts (click for view of last 6 months from Stockcharts.com):
S&P 500 or SPY
SDS (ProShares UltraShort S&P500)
U.S. Dollar Index (volatility index)
EEM (iShares MSCI Emerging Markets)
VIX (volatility index)
VXX (iPath S&P 500 VIX Short-Term Futures ETN)
EWG (iShares MSCI Germany Index Fund)
CAT (Caterpillar).

Commentary

Wow: A staggering bond rally: 3 yrs 2.2%; 10 yrs 2.8%. The recessionary like conditions showing up in commodity price free fall is now scary

— Stephen Koukoulas (@TheKouk) December 10, 2014

 The above tweet comes from an Australian economist whom I follow relatively closely as a check on my views about the Australian and global economy. The rates are on Australian bonds, but bond yields are falling all over the globe. I post it as just one example of a very palpable fear I feel is growing as commodity prices continue tumbling seemingly with no end. Such an extended collapse is simply not part of our normal (recent) experience, so assumptions and conclusions that demand is plummeting in places like China strike a very loud chord. Then again, commodity prices got to current levels after a run-up that had not been seen for a very long time either. Here is an example from Australia’s latest commodity price index.

Is THIS a bubble that is in the middle of an epic collapse? Ten years and running without stabilization…

Source: Reserve Bank of Australia

Note very well that this collapse in commodity prices has unfolded for 3 1/2 years. Thus, it makes little sense to say “the market is going down because commodity prices are plunging.” Perhaps commodities finally reached a tipping point, like adding oil to the plunge, but clearly the story is more complex with the S&P 500 just a few percentage points off all-time highs.

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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