CRB BLS Raw Industrials Monthly Chart with 12 MA Cross and SPX Comparison

There is lot of talk these days about the Raw Industrials Index, also known as the Rind Index. This less-followed index is a key barometer of global economic health and also of oil prices moving forward. The SPX moves in the same direction as oil. The make-up of the Raw Industrials Index includes hides, tallow, copper scrap, leqd scrap, steel scrap, zinc, tin, burlap, cotton, print cloth, wool tops, rosin and rubber.  In other words, key raw materials that are very telling for overall global economic health. If these products are in great use the economy is moving along with high fives all around.  If these products decrease in use and there is less need for raw components, then obviously factories are slowing down and demand for products is low. Companies are not expanding or preparing for any significant recovery, quite the contrary, the Rind Index moving lower is a very negative and bearish market signal.

Looking at the spaghetti chart above, the black line is the Rind Index, the smooth red line is the 12-month MA, this is a monthly chart, and serves as a signal line to gauge economic and market health.  In August 2008, the Rind fell thru its 12-month MA indicating major trouble on tap. The broad markets crashed from September 2008 to March 2009.  The Fed pumped the markets with QE1 intervening with their money-pumping schemes. This caused the Rind to cross up thru the 12-month MA in May 2009 to signal happy times ahead for the economy and markets.  QE2 stimulus further pumped the Rind Index higher. The free easy money stimulated the economy with phoney market strength. The Rind topped in March 2011. In August 2011, price fell thru the 12-month MA indicating trouble ahead. However, the Fed, and now the ECB, pumped with Operation Twist and LTRO 1 and 2 to save the SPX.  This year, the SPX rolled over in May so the Fed and ECB are pumping again with the OMT and QE3 but it appears the cat is out of the bag. The markets are now below where these stimulus announcements occurred.  The blue arrows show how each stimulus pump is less and less effective. The central banker emperors are not wearing any clothes. As Star Trek fans will appreaciate, Resistance is Futile, perhaps the markets will finally correct properly.

The Rind is falling thru the pink wedge, and price remains under the 12-month MA, so this indicator contininues to signal trouble ahead.  Perhaps price wants to return to the teal sideways triangle which is a range of 470-550. The current print is 505.23. The 12-month MA is about 523. As long as the Rind stays under 523, under the 12-month MA, the broad indexes should remain weak for the considerable future.  Special thanks to our friends at crbtrader.com for providing the base chart that Keystone annotated. Their site is very useful in understanding the CRB BLS family of products. 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.