Baltic Dry Idex... A contrarian signal.

With all this chaos in the markets, including the crisis in Europe and China's downswing. There is a lot of talk out there abotu a double dip recession. Problem is that NA companies are doing very well with positive economic numbers coming out of the the States and Canada. Not sure where the overall direction of the market is heading or whether this is going to be more than just a steep correction one factor you have to consider is the Baltic Dry Index which is a barometer of economic activity. So far the BDI is continuing to rise in a contrarian signal against the declining market.

This is a great index for economic outlook and so far it is signaling not to worry as shipping has not slowed down during this period but infact increased against the latest declines in the market. Until this index starts tipping down, that this is infact just a steep correction. I doubt that this correction is over immediately and we start a new run, but talks of a double dip recession are a little early in my opinion. This debt crisis will have to get much bigger for the global economy to shut down again.

Another note, as long as the bailouts keep happening... the markets won't falter like they did in '08/'09, but the cost of these bailouts will be steep in the future taxing our kids too death through inflation and increased taxes to fund the greed, laziness, and entitlement attitudes of the baby boomer generation.

Euro Leading the Markets

Not sure what to do in this volatile market? With Europe on jitters and the EU being held together with a ball of yarn it seems these days everything is taking its lead off the Euro. Yes we have many other fundamentals in this market the should be driving us, but when fear and panic take over and Euro starts falling, it sets off a domino effect and investors start selling everything out of fear. So for the immediate turn until Europe gets off the front pages with the debt crisis, markets will continue to take their cue from the Euro.

Happy Trading

Bounce Failed

Watching the Euro tank yesterday was a big signal that we have not found an intermediate bottom and sure enough today markets are down big time trading right now below the lows of the last 6 months. The other sell signal was the DOW not being able to make new highs from Friday and then the bottom falls out today. We may reverse here but the probability is much less than that of a bounce on Friday. Every technical saying sell now with the Euro looking to make new lows the rest of the week, this is not looking good for markets as a whole. Further downside imminenet.

Will Gold Move To a Bear?

Some people are calling for gold to correct with the rest of the markets in this bear as it did in 08/09. Not to sure if I agree...

Argument is inflation/deflation for the bear side with global ST deflation a possibility with EU and China bears. Problem is that is not the only component that is driving gold. The decoupling of POG from the USD this spring has major significance that some people are just plain missing. Gold will selloff on the all asset liquidation days for sure, but it will have major strength as an emerging alternative currency.

Any price movement between the 50 and 200 MA's is a major buying opportunity. With impending implosion of the Euro and sell-off of major currencies, an obvious choice has been gold. Confidence will not return to the currency markets for awhile so this trend to buy gold as a currency hedge is increasing, not decreasing.

Added to this fact is that the long term result of printing all this money today to bailout the financial crisis and now this impending debt crisis, is that there will be major inflation over the long term. Prices don't go up because of demand, but because of a falling value of a currency. Simple. Too much money added too quick will take down the currency because now value has been created. To paint a picture, it would be like preferred dividend holders getting a ridiculous common stock dividend that diluted the company enormously while the rest of the common stock shareholders got nothing. All they are doing in the long run is dilluting the currencies.

The party is long from over in the current gold bull.

Markets Look to Rebound this Week

After a very strong selling push to below 10,000 on the Dow the markets look to be extremely oversold for the short term and look like they could rebound next week. One key indicator for me that next week should be a good trading week to the upside is that the RSI made a strong move and bounced off 30 with some force. It bounced off 30 two weeks ago as well and tested the 50MA before moving back down.

I am not quite in the double dip camp yet, but it looks like the markets have topped out in the end of April. Any push higher should be traded and sold in my opinion and worries about Europe are far from over. The aid package for the EU should help alleviate short term worries and we may see a significant bounce in the EUR and GBP while markets rebound. Some key areas of resistance in the Euro would be around 1.2700 and 1.3000 where it initially started to break down and could technically fill that gap up before another leg down.

I highly doubt that Europe's woes are over with Greece and it will probably take most of the year to sort out what is going to happen in Europe and its economy. The severity of Europe's may have a significant impact on China's economy as the EU is a major customer of China's exports. With Geithner in Asia stressing that China needs to allow the Yuan to rise to allow China to develop its internal consumer economy which is growing, to me is a signal that China has to change its export driven economy and can no longer be rely solely on exports. If they remain this way they are subject to global economic conditions and can not be a leader in consumerism like they should be with a population of over 1 billion. With China still unwilling to unpeg their currency from the USD it still shows their huge reliance on their export industry as it would almost certainly lead a significant rise in the Yuan in the current global conditions.

Another, interesting tidbit was the US doubling their exports which is what I have been blogging about on Stockhouse for the last year. That US needed to reinvent itself as an economy and no longer rely on the consumer and a strong dollar to outsource because the American consumer is too in debt to keep spending at this rate and couldn't pull the economy out. They have deflated their dollar which had a double positive effect of reinvigorating their export industry and makes their debt much cheaper to pay back. So far so good for the US plan for recovery without the American consumer. But if this strategy keeps up, US unemployment will heat recover and when full-time employment numbers come back, so will the rest of the economy.

With Geihtner talking up the global economy this weekend and as well as the EU aid package, attitudes seem to be more positive going forward. At least for the short term. One disconcerting thing that could be red herring for now is the German Chancellor and the British Prime Minister not seeing eye to eye. But with expected visits from Giethner this week. Political rhetoric coming out of those 2 powerhouse EU nations may change and be a little more united.

Gotta love the gold stocks, in a major bull market and had such a nice selloff can't help but buy those that retreated to their 50MA's.

My top 3 juniors are EAS.V since $2, CSI.TO since $4.50, and VEN.TO since $5. I would buy all 3 one weakness.

Happy Investing

New Blog Western Investor

Hi guys,

After a long and sporadic absence I have decided to start up my blog in a meaningful way again after semi retirement for the last few years. I have posted on stockhouse for years but am looking to reach a different audience. Not the small amount of Canadian retail investors that it appeals to but hopefully more of an international audience with blogspot. I consistently pick winners that gain anywhere form 50% to 1000%+ such as my most recent picks over 1000% Teck (TCK/B.TO) and Bankers Petroleum (BNK.TO).

I focus mainly on Canadian junior resource companies but you can find me picking apart and analyzing any sector that is hot and the herd is piling into, although I prefer to get there early and wait. It is a much more satisfying picking a new winning trend or stock early than identifying something to go along the ride with. I hope to keep this blog active and am trying out different sites to post on.

I like the HTML editing factor, although I am not one to dress up my posts much. But what will sell my the most is how I can integrate all of my social media sites into one. It would be nice to be able to post on one blog and have it picked up by all social sites like twitter, facebook, and the various blogs I have around the web such as Ihub, SI, and Stockhouse. Anyway, so I will try it out here for a while and see how my audience takes.

In addition to Candian Junior resource stocks, I have a keen interest ion the global economy and how it relates to currency markets, gold, and global markets in general. I will try to identify winning positions in the currency markets as well which is a new twist.

I hope with you my readers that we make this one of the best business/economic/stock blogs out there.

Cheers!

Western Rookie