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Global Cargo: A Ship Stuck at Sea
To understand how global economy is really doing, look at global shipping rates.
If you keep up with international news, you may have seen this picture on Britain's dailymail.co.uk on September 16. The story said:
"The biggest and most secretive gathering of ships in maritime history lies at anchor east of Singapore. Never before photographed, it is bigger than the U.S. and British navies combined but has no crew, no cargo and no destination..."
What a stunning image of the world's cargo shipping industry in the doldrums. The world's cargo navy with no cargo to carry...
Here at Elliott Wave International, we forecast markets and economies by deciphering Elliott wave patterns in market charts. But we also employ a number of secondary trend indicators -- for example, global shipping rates.
Regular readers of elliottwave.com will remember that Chris Carolan, the editor of EWI's Asian-Pacific and European Short Term Updates, refers to this indicator on occasion. For example, in the July 10 ESTU, Chris posted this chart of the Baltic Dry Index -- a measure of shipping rates worldwide that is also considered a reliable measure of economic activity. As you can see, the index got absolutely crushed in the first wave of the crisis, but enjoyed a strong rebound this year:
"A bull might note that the Baltic Dry index rallied over 600% from its low. But that rally from the low is a three-wave move, suggesting a correction against a larger trend. Any additional weakness in the Baltic Dry will break the rising trendline channel of its recent rally." -- Chris Carolan, July 10 European Short Term Update.
In his September 15 Asian-Pacific Short Term Update, Chris revisited that Baltic Dry Index forecast -- and notice that the index did fall below the trendline, as expected:
"Exports have been the lifeblood of the Asian-Pacific economy. When we read so much about the alleged economic recovery, we always like to look at these export indicators and see if they reflect the rosy view of those bullish commentators. It’s been a month since we’ve showed the Baltic Dry Index of freight rates. This index is down another 10% in that time. Clearly, there is no rising demand for shipping services at this time. Frankly, the export economies remain threatened; we can see the evidence in [the depressed] export-related prices and demand for ships, as well as in increasing trade friction. There’s no sign of an export led recovery at this time." -- Chris Carolan, September 15 Asian-Pacific Short Term Update.
China, India, Japan, Australia, Taiwan and beyond -- read the latest forecasts now in EWI's Asian-Pacific Short Term Update. Get instant access with a RISK-FREE subscription.