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Rudi’s View: Two Trend Changes – The Charts

Always an independent thinker, Rudi has not shied away from making big out-of-consensus predictions that proved accurate later on. When Rio Tinto shares surged above $120 he wrote investors should sell. In mid-2008 he warned investors not to hold on to equities in oil producers. In August 2008 he predicted the largest sell-off in commodities stocks was about to follow. In 2009 he suggested Australian banks were an excellent buy. Between 2011 and 2015 Rudi consistently maintained investors were better off avoiding exposure to commodities and to commodities stocks. Post GFC, he dedicated his research to finding All-Weather Performers. See also "All-Weather Performers" on this website, as well as the Special Reports section.

Rudi's View | Jul 15 2010

By Rudi Filapek-Vandyck

This story should be read in conjunction with “Rudi's View: Two Trend Changes For July?” published yesterday on the FNArena website.

Below are three charts (with thanks to technical analysts at Barclays Capital) I think summarise exactly what I was explaining in yesterday's story. I believe these technical signals, and possible implications for risk assets, speak for themselves.

Commodities, including precious metals, have had a hard time in the first six months of calendar 2010. I have maintained from late last year onwards this was always going to be the case because the US dollar had reversed trend.

We may well be witnessing another reversal in the underlying USD trend on the back of President Obama recently reiterating the US economy will export its way into solid growth again. There's more than just a fair chance global investors have interpreted this message as “the US administration wants a weaker USD” (as that will help achieve the increase in exports).

As far as the base metals story goes, Q3 is likely to deliver more negative developments and bearish indications, but it is well possible that financial markets are now taking the view: too low is simply too low.

This would also fit in with expectations here and there about a pick up in overall momentum from the final quarter of this year onwards.

Again, nothing of the above is set in stone, and we all know how wrong financial markets can be at times, but the above appear to be two scenarios unfolding as we approach mid-July.

Note, and as stated in yesterday's story, both technical signals yet need confirmation. One could argue though, as the USD Index declined again overnight, that the first signal could be seen as confirmed by now. Another reason to watch USD/EUR very closely.

Note these trend changes do not take place in a matter of hours or days. Volatility is to remain part of the package.

If you are reading this story through a third party channel and you cannot see the charts included we apologise. Technical limitations are to blame.

P.S. I – All paying members at FNArena are being reminded they can set an email alert for my Rudi's View stories. Go to Portfolio and Alerts in the Cockpit and tick the box in front of 'Rudi's View'. You will receive an email alert every time a new Rudi's View story has been published on the website.

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