Tuesday, December 31, 2013

BDI Baltic Dry Index Negative Divergence Price Extended Sideways Channels

Everyone was still poo-pooing the shippers when price broke up and out of the long-term sideways symmetrical triangle from 2012-2013 this summer. This pattern paved the way to the upside and the prints above 1700 easily satisfied the projections. There are lots of shippers to play; traders like DRYS as a favorite, DSX, SEA, BALT, FRO, GNK, EGLE, etc... But the last one-half year was a heck of a run. The shippers also typically receive love ahead of the holiday season as a lot of bulk dry goods are shipped. Coal, iron ore and steel have rebounded in 2013 and this goes hand and hand with the stronger BDI. The chart, however, says the party is long in the tooth--just when many are jumping on the band wagon. Price is far extended above the moving averages (pink dots) requiring mean reversion. Shippers tend to go up as Treasury yields rise so the expectation considering the chart above, is for yields to remains somewhat flat for 2014 rather than rising sharply.

The red lines show the negative divergence top a couple weeks ago and the neggie d was universal across all indicators, therefore, the chart is not interested in price coming up for a matching or higher high again. Note how the indicators are all lagging as price nears that matching high. Even if a higher high prints, that would be a good short opportunity since the negative divergence should be firmly in place. Projection is sideways to sideways lower moving forward for weeks and months ahead with price likely seeking the sideways channels through 1600-2300 or through 1200-2300. Those looking for continued upside in the Baltic are going to likely be very disappointed as 2014 proceeds. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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