Friday August 17, 2018
Godzilla Dollar Tramples Commodity and Currency Prices
Emerging markets stock are teetering on the edge of a bear market given the rising dollar and tariffs.
The price of imported oil in Turkey has risen 60% this year.
Wall Street Journal Friday August 17, 2018
Godzilla is a fictional pre-historic movie monster, awakened by nuclear radiation. Highly agitated, Godzilla proceeded to trample 1954 Tokyo.
In similar fashion the Trump has unleashed tariffs and a strong dollar with repercussions around the world.
The Turkish ETF TUR has fallen from 46 to 19 this year recovering to 21.36. Emerging market EEM has dropped form 51 to 41.77. Copper is down from 3.30 to 2.62. Gold is down from 1,360 to a new low for the year of 1,184. Likewise, silver is down from 17.50 to 14.50. It is a wonder crude oil has only fallen to the mid 60s.
But let’s take a closer look at TUR. Market tops take time to form as they happen amid positive social mood think, hey, this party will never end as with the dotcoms. Market bottoms however form from extreme negative mood, think, sell at any price I will never own this junk again! And so bottoms often take a parabolic drop accompanied by hysterically high volume. TUR fits that profile. Volume the last two days was 10x normal. Wednesday’s drop was 20% of its price. Thursday’ volume was 25 million shares. TUR has lost half its value since April 1.
But amid this gloom and doom, TUR recovered Thursday from 19to 21.36. Copper rebounded 2.2%. The Dollar was down .8% against the Mexican peso and lost .6% versus the Korean won.
In short, amid massive negative social mood regarding beaten down markets, it is time to consider some contrarian ideas. Ten times normal TUR volume and a recovery suggests most of the sellers may have finally give up at the bottom.
Gold is down form 1,360 to 1,184. Silver reversed form its sub 14.50 low Thursday to close at 14.71. That certainly did not reverse the daily trend but is in line with reversals in TUR and copper. Mining shares have been clobbered with the XAU of gold and silver miners down from 92 in January to 64.27 Thursday .
I am not recommending buying any of these plays just yet, but it is time to pay close attention to potential bottoms in washed out shares that have been tossed on the Wall Street trash heap. That is how the March 2009 lows in the stock market were formed amid the worst sell-off in decades.
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