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Global Ocean Freight: Another Measure of the Downturn
The 90% decline in the The Baltic Dry Index adds to the depth of the financial crisis.
Japan's NIKKEI, a benchmark stock index and Asia's equivalent of the DJIA, fell to a 26-year low in October. With severe declines in other regional markets, Asian investors, like their counterparts in the U.S. and Europe, are looking for answers on when will the carnage stop.
Here at Elliott Wave International, besides the Wave Principle we also use other technical indicators to determine the trend. Take a look at this excerpt and chart that the editor Chris Carolan showed his Asian-Pacific Short Term Update subscribers in the November 4 issue:
"With so much of the Asian-Pacific region dependent on exports and those exports needing to be shipped, I’m using stocks like COSCO [China's major ocean freight company] and indexes like South Korea’s KOSPI with its significant ship builder representation as transportation ‘bellwethers’ for the region. COSCO is another waterfall chart, having fallen 88% from its high.
"What’s the news here? IT’S NOT BOUNCING! (Pardon the all-caps.) I think this is news. Markets around the world are enjoying rebound rallies and the largest shipping stock in the largest exporting country can’t get off the mat and manage even a 10% bounce off its lows."
Shipping rates have been falling around the globe, not just in China. The November issue of EWI's Elliott Wave Financial Forecast also observes that, "The Baltic Dry Index is another index that expresses the global scope of the downturn. It measures the demand for shipping capacity through dry bulk shipping rates. It is down more than 90% -- since May 23, only five months ago!"
"There’s a message here," continues the Asian-Pacific Short Term Update editor Chris Carolan. "And it’s very bearish." However, "Volatility is slowly coming out of the Asian-Pacific regional indices," and that could very well be a short-term bullish sign. Get the latest in the new, November 6 issue of the ASTU – read it online now, risk-free.