February 16, 2013 at 10:40 AM EST
Are Commodities Providing Another Market Warning ?
Saturday, February 16, 10:30 a.m. Last May as the market topped out in its 10% decline to the June low, my weekly column pointed out how commodity prices tend to be quite accurate predictors not only of stock market direction, but to an uncanny degree the severity of market corrections. Plunging Commodity Prices Are Ominous [...]

Saturday, February 16, 10:30 a.m.

Last May as the market topped out in its 10% decline to the June low, my weekly column pointed out how commodity prices tend to be quite accurate predictors not only of stock market direction, but to an uncanny degree the severity of market corrections. Plunging Commodity Prices Are Ominous For Stock Market! May 11, 2012

It may be time for an update.

In that article last May I noted that:

“Consumers understandably like to see prices for commodities decline, the more the merrier, particularly gasoline and energy costs.

Many analysts also take commodity price declines as a positive for the economy, on the theory that consumers will have more spending money in their pockets, and manufacturers will have lower costs, so hopefully greater earnings.

Investors tend to also take declining commodity prices as a positive for the stock market on the same reasoning.

Unfortunately, history doesn’t confirm the optimism.”

This is an updated chart from that article:

021613g

As it shows, the CRB Index of Commodity Prices plunged 57% in the 2008-2009 economic downturn, and the S&P 500 plunged 57% to the early 2009 bear market low.

In the summer of 2010 the CRB Index fell 15% as the economic recovery began to stumble. And the S&P 500 fell 15% in that summer’s market correction before the Fed came to the rescue with QE2.

In 2011 the CRB began declining in April and fell 19.5% by late summer. Sure enough the economic recovery stumbled again and the S&P 500 fell 21% to its low before the Fed came to the rescue again with ‘operations twist’.

My May article ended with the observation that the CRB Index had declined 10% from its high in February, and wondered if that was not a warning for the stock market.

And to update from that point, sure enough the S&P 500 declined 10% to its June low last year.

So should we be concerned that even as the stock market has been rallying impressively since November, the CRB index has not, and is now down 7% from its peak last fall?

To read my weekend newspaper column click here: Gold’s Correction Is Not Over! 

Subscribers to Street Smart Report: In addition to the charts and analysis in the ‘premium section’ of this blog post, the new issue of the newsletter from Wednesday is in your secure area of the Street Smart Report website.

Yesterday in the U.S. Market.

A mostly negative day on a typical sizable pick-up in trading volume on an options expirations day. The Dow was down as much as 70 points intraday. But they recovered it enough to have it close up 8 points going into the weekend.

But the rest of the market closed mostly down. Trading volume jumped 50%  from the recent .6 billion to 0.94 billion shares traded on the NYSE.

The Dow closed up 8 points, or 0.1%. The S&P 500 closed down 0.1%. The NYSE Composite closed down 0.2%. The Nasdaq closed down 0.2%. The Nasdaq 100 closed down 0.2%. The Russell 2000 closed down 0.1%. The DJ Transportation Avg. closed down 0.2%. The DJ Utilities Avg closed up 0.3%.

Gold plunged $26 an ounce at $1,608.

Oil closed down $1.23 a barrel at $96.08.

The U.S. dollar etf UUP closed up 0.1%.

The U.S. Treasury bond etf TLT closed down 0.3%.

Asian markets closed mixed in their last session of the week.

The Asia Dow closed down 0.3% Thursday night (Friday in Asia).

Among individual markets:

Australia closed down 0.1%. India closed down 0.2%. Indonesia closed up 0.5%. Japan closed down 1.3%. Malaysia closed down 0.1%. New Zealand closed down 1.0%. South Korea closed up 0.1%. Singapore closed down 0.2%. Taiwan closed up 0.3%. Thailand closed down 0.3%.

Yesterday in European Markets.

European markets closed mixed yesterday. The London FTSE closed unchanged. The German DAX closed down 0.5%. France’s CAC closed down 0.3%. Italy closed down 0.3%. Spain closed down 1.2%.

Global markets for the week.

Another week with not much movement in the U.S. market. The Russell 2000 and Transportation  Average again out-performed.


THIS WEEK (February 15)
DJIA13981- 0.1%
S&P 5001519+ 0.1%
NYSE8933- 0.1%
NASDAQ3192- 0.1%
NASD 1002764- 0.4%
Russ 2000923+ 1.0%
DJTransprts5946+ 0.6%
DJ Utilities472- 0.4%
XOI Oils1,336- 1.3%
Gold bull.1,608- 3.5%
GoldStcks143.90- 5.6%
Canada12686- 0.9%
London6328+ 1.0%
Germany7593- 0.8%
France3660+ 0.3%
Hong Kong23444+ 1.0%
Japan11173+ 0.2%
Australia5054+ 1.3%
S. Korea1981+ 1.6%
India19468- 0.1%
Indonesia4609+ 2.6%
Brazil57903- 1.0%
Mexico44152- 2.1%
China2545unchgd 
LAST WEEK (February 8)
DJIA13992- 0.1%
S&P 5001517+ 0.3%
NYSE8935- 0.3%
NASDAQ3193+ 0.4%
NASD 1002775+ 0.4%
Russ 2000913+ 0.3%
DJTransprts5911+ 0.9%
DJ Utilities474Unchgd
XOI Oils1,354- 1.0%
Gold bull.1,667unchgd
GoldStcks152.43+ 0.3%
Canada12801+ 0.3%
London6263- 1.3%
Germany7652- 2.3%
France3649- 3.3%
Hong Kong23215- 2.1%
Japan11153- 0.3%
Australia4989+ 1.0%
S. Korea1950- 0.4%
India19484- 1.5%
Indonesia4491+ 0.2%
Brazil58497- 3.1%
Mexico45089- 1.5%
China2545+ 0.5%
PREVIOUS WEEK (February 1)
DJIA14009+ 0.8%
S&P 5001513+ 0.7%
NYSE8965+ 0.7%
NASDAQ3179+ 0.9%
NASD 1002763+ 1.0%
Russ 2000911+ 0.7%
DJTransprts5857- 0.2%
DJ Utilities474+ 1.0%
XOI Oils1,368+ 2.9%
Gold bull.1,667+ 0.5%
GoldStcks151.94+ 0.7%
Canada12768- 0.4%
London6347+ 1.0%
Germany7833- 0.3%
France3773- 0.1%
Hong Kong23721+ 0.6%
Japan11191+ 2.4%
Australia4941+ 1.7%
S. Korea1957+ 0.6%
India19781- 1.6%
Indonesia4481+ 1.0%
Brazil60351- 1.3%
Mexico45768+ 0.4%
China2532+ 5.6%

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Next week’s Economic Reports:

Next week will be a holiday shortened week, with a fairly heavy schedule of potential market-moving economic reports clustered mostly on Wednesday & Thursday, and including Housing Starts, Existing Home Sales, the Consumer Price Index, FOMC minutes, etc. To see the full list click here, and look at the left side of the page it takes you to.

I’ll be back with the next blog post on Tuesday morning at 9:25 a.m. 

To read my weekend newspaper column click here: Gold’s Correction Is Not Over!

Subscribers to Street Smart Report: The new issue of the newsletter from Wednesday is in your secure area of the Street Smart Report website.

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