FINANCIAL ICEBERG

Always consider hidden risks

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Dr Copper and his funny friends dont agree with SP500 - Divergence !

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Dr Copper ( Right scale )

SP500 ( Left scale )​

In fact, yesterday I mentioned that Dr Copper was not trending the same way as the SP500... In reality, I figured out that many of his friends were saying the same thing : SP 500 is the only trading up , feel home alone ! LOL!



​​It is very interesting to note the huge divergence between copper prices ( basic commodity economy driven ) compare to the SP500 ( liquidity driven by the FED ) ( See graph below )









​Besides looking for trading opportunities, it is important to monitor the price action in commodities even if you only trade equities. In many cases, commodity volatility will occur immediately prior to equity volatility .



So the real economy commodities ( copper, oil, coal, steel ) are not sending the same message as the super charged SP500.

​ And even compare to the Mighty Baltic Dry Index, it is scary. ( see graph below )



​​Just be aware that it can t last very long...

It seems that the market is disconnect between the economy based commodities and real demand from the liquidity driven stocks...





​​​Even on a macro basis, we see the GSCI Index (S&P GSCI (formerly the Goldman Sachs Commodity Index) contains a much higher exposure to energy than other commodity price indices such as the Dow Jones–AIG Commodity Index. ( See graph below )

GSCI ( Right scale )

SP500 ( Left scale )​

And now crude oil ( WTI )...

West Texas Intermediate ( Right scale )

SP500 ( Left scale )​

And now Coal...

Coal Prices ( Right scale )

SP500 ( Left scale )​

And the Mighty Steel Coil...