Global Markets, Commodities and the US Uptrend…
A textbook bull market rally from the pullback and the Daily Battle Plan Model Portfolio was able to buy a unit of SPY on Thursday’s swing low. If you took the signals you should have locked in your gains on Friday’s close.
The market has changed over the past couple of weeks and we should look at what has changed, and also look at it longer term.
Friday’s rally did not find its way into many country fund ETFs and you can see from the implosion in many commodity prices that there’s more of a global deflation feel instead of a the expected inflation. Whether this is just a blip or a longer term reality is yet to be seen. For those of you who are on The Machine (if you’re not call our office at 888-484-8220 ext. 3 and ask for a free one week trial), and want to track this closer, add the Bear Momentum Strategy to your portfolio. You don’t necessarily need to trade it; it can be used to gauge the overall trend of world markets.
If you start seeing short signals appear, as they did earlier in the year, it will tell you that the global economy has stalled and it’s a warning signal for the US. These short signals last triggered earlier in the year, ahead of the implosion in equity prices in India, China, Brazil, and many other Latin American countries. This implosion did not find its way into the US (we can thank the Fed for this). The longer term concern is that with all the money that’s been pumped into the world’s system, you would expect to see commodity prices at highs. In some cases just the opposite is true and it places greater pressure on all Central Banks to continue pumping cash. My concern is that it’s deep in the game and it’s certainly worked in the US. Ideally it will start working in greater force globally…commodity prices, currencies, and now global equity prices are saying it’s not.
The US by itself remains in a long term bull market. By any trend following measurement, looked at any time frame, the trend is up. Every single person who has called for the top along the way has been wrong. The main driver to understanding market behavior is to look at prices. And US equity prices have been in a sustained upward trend from October 2011 through today. We’ll continue to primarily trade with the US trend for as long as it remains higher.