A New Ballgame

Summary and Conclusions

Almost unanimously, the indicator charts are signalling the imminent emergence of a new ballgame.

Commodities in general, and oil and gold in particular have already broken upward, whilst the Industrial Equity Indices and the US Dollar are showing nail biting indecision.

The oil price is looking dangerously close to breaking up through the $100 per barrel level; and also looks like it is about to break up relative to gold.

Whilst it could be argued that the patterns on the Industrial Charts are bearish, there is an underlying subtlety which cannot be ignored - specifically, underlying volume patterns are at odds with the price patterns. Given this anomaly, the industrial equity charts may surprise many technical analysts by breaking "up" notwithstanding the apparently bearish patterns.

There is no question that such a development would be counterintuitive. If the Industrials break up to follow the key commodities, then the only logical explanation which this analyst might offer is that the economy will split itself into two sectors:

The investment sector will begin to show signs of inflation as too much paper money chases too few investment opportunities

The Industrial/Commercial sector will begin to show signs of stagflation as prices charged to customers by businesses rise in the face of stagnating or falling volumes. Profits will rise in dollar terms but will fall in real terms. Should this happen, it will have serious implications, in that it might be a harbinger to a slowing "velocity of money". In turn, a slowing velocity of money could eventually bring the US (and world) economy to its knees.

The US Dollar looks like it is about to come under renewed pressure and US interest rates might begin to rise as the market "forces" an adaptation to inflationary pressures.

Unless something structurally different begins to emerge, in context of rising inflation, rising interest rates, falling property prices and a heavy debt load, the US consumer in particular is not facing a particularly happy medium term future.

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