Sunday, July 6, 2008

It's all about the global expansion

I must say the global growth story is starting to get pretty thin. I'm constantly hearing how the US recession won't affect profits because growth in the emerging markets will support international companies. I'm not buying it.

I don't believe for a second that the rest of the world is just going to go on about it's merry way as the US sinks into a severe recession. For the most part every stock market in the world is agreeing with me.

So is the Baltic Dry Index. After a brief breakout to new highs this index has rolled over and is heading down again.

The materials sector is also breaking down. If the world were still expanding then why are the material stocks on the retreat? The expansion in China for the Olympics is now finished. The Shanghai exchange and the XLB are both saying that the demand is over for now.

Folks bear market rules now apply. You don't trade from the long side anymore. You wait for the rallies and sell into them. That's how you make money in a bear market.