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IS THE BALTIC DRY FORECASTING MARKET WEAKNESS?

22 December 2009 by Cullen Roche 4 Comments

As we mentioned last week the Shanghai equity markets have served as a leading indicator of U.S. stocks over the last year.  While Shanghai has broken down and moved sideways over the last few months we have seen similar sideways action in the Baltic Dry Index.  Not surprisingly, the fundamental correlation between China’s export driven economy and this shipping index are high.  With a 30%+ sell-off currently in process in the Baltic Dry Index we have to ask ourselves if the fundamentals in China and the global shipping industry aren’t weaker than many equity markets would have you believe.

bdi

Cullen Roche

Cullen Roche

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Comments
  • James

    Didn’t the baltic sea index implode recently and nothing happened?

    12/22/2009 at 3:58 AM
    • Ivan

      The same thing occurred to me. The Baltic dry plunged not so long ago and this was interpreted as a sign of coming market correction. Nothing happened.

      12/22/2009 at 5:48 AM
    • Cullen Roche TPC

      It hasn’t proven to be a very good indicator. The correlation with China, however is interesting. When it imploded China followed suit and quickly peaked.

      12/22/2009 at 8:49 AM
  • Evin Ormond

    Actually I still find nothing worrying in how the BDI evolves.
    The year change 2008/2009 was exceptional, but 2009/2010 looks quite sound to me.
    There is a rise visible from October until the middle of November 2009. These are most probabely the holiday related goods (goods for the holiday sales, gifts, things for the Christmas and New Year events) being shipped (mostly to the US and Europe). After those shipments, the index goes down to its ‘normal’ value, which should be a slow rise as indicated by the 200 days moving average.
    Only if the daily curve would be going below the MA(200), this would indicate there is a serious problem ahead.

    12/30/2009 at 11:24 PM