On 6/29, in the chart below , I shared (see post) … “All I wanted for Christmas was some inflation!”
Why inflation? At the time, DBC (commodities ETF) along with interest rates were falling and the media was alive with DEFLATION forecasts. Deflation represents falling prices and the potential the economy was getting worse. Not a pretty scenario to say the least. The wish for inflation was a wish for some form of improvement in the economy. Are we starting to see some improvements?
DBC is attempting to break out of this flag/pennant pattern. In the past, rising commodity prices more often than not, are tied to a global economy that is acting a little better. Not only is DBC reflecting a little strength, the Baltic Dry index is up over 40% since the lows of mid July. Railroads and Copper aren’t acting poorly either (see this post).
Any other signs of some improvement…How about below? These breakouts are a positive, like DBC!
Wave the “all is fine about the economy flag?” NO, NO and NO! A thumbs up for some potential/initial “snow flakes of improvement?” YES!
Most likely areas that should benefit “IF“ the Christmas list comes true and DBC keeps moving higher…Emerging markets, Commodities (Gold, Silver, Copper).
Game Plan…Keep long positions with stops in play! Could the DBC, high yields, Emerging markets, railroads and copper breakouts help the 500 index break above its trading range???…Stay tuned!