BDI Baltic Dry Index

Global oil demand is slowing especially from China. The oil weakness matches the long-term ongoing weakness in dry bulk goods, the Baltic Dry Index, for the last few years. The sideways symmetrical triangle played out in 2012 and 2013 sending price higher. The the negative divergence top (red lines) was also highlighted previously which created the spank down. The BDI has dropped like a stone as coal, coke, cement, grains, rubber, resins, powders and other dry bulk goods see lesser demand. If the global economy was robust the BDI should be flying higher. There does remain a strong capacity pulling the BDI lower as new ships are coming on line which keeps the freight costs low. Shippers cut each other's throats to keep the fleet busy.

Nonetheless, the lackluster BDI is another piece of the disinflationary and deflationary puzzle ongoing around the world. The chart indicators are long and strong wanting to see higher highs for prices going forward. The 1200 resistance should give way. The expectation, considering the lackluster global economy along with the chart metrics above, would be for the BDI to stagger sideways through 700-1600 perhaps for a year or two. If the BDI takes out 1600 moving higher, the inflationists will win the battle moving forward since the global economy should pick up quickly and the velocity of money will take hold. A BDI remaining under 1600 likely predicts a continued world disinflationary and deflationary funk going forward. With the ongoing near-term upside, the shipping stocks should be explored as potential longs. 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.