BDI Baltic Dry Index Weekly Chart

Baltic Dry Index is a useful forecasting tool for markets. If the shipping is rocking and rolling, with grains, iron ore, coal, and other dry goods moving around the globe, it shows that the markets and global economies are strong. Note how the BDI dropped and bottomed in late 2008, during the market crash. Shippers, however, were already coming off the bottom indicating that happy blue skies, or blue waters, were forecasted ahead. The markets bottomed in March 2009 playing catch-up. Interestingly, the BDI topped late 2009 as well as mid-2010 and headed lower ever since, not a ringing endorsement of the global rebound, and alas, we are in the midst of a market crash. Note that lower lows and lower highs are in place for two years. As the good times rolled in 2009 and 2010, the shippers commit to building and buying more ships to milk the good times, but, as always happens, they commit at the wrong time. The BDI has languished over the last year as a glut of new ships are now available and shipping rates have tumbled as the shippers compete against each other for biz.

The chart has a sideways texture to it, the ADX never indicating over the last couple years that the down trend was strong. Note the importance of the 2250-ish level. This year shows a sideways symmetrical triangle behavior and over the last two weeks, an up side break out. Regaining the 20 MA is bullish, next watch the 50 MA. After a breakout, a back kiss would be in order, perhaps to fill the gap up from last week. Sometimes traders will try to front fun the index so the break out may be premature, then again, perhaps the Baltic is repeating its move from late 2008. Considering the sideways movement apparent in the chart, the jury is out. A big positive is the RSI and stochastics regaining the 50% levels so watch that for hints.

Should the China bubble pop and a global recession emerge, the Baltic would surely move back down. In fact, a down move in commodities would be expected before Chairman Bernanke institutes QE3. Watch DRYS earnings this week for a vital clue. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.