Saturday, June 5, 2010
David Rosenberg points out in his newest newsletter than the Chinese stock market leads commodities:
Indeed, as the chart below shows, the Chinese stock market leads the CRB index with an 85% correlation and by 86 days (call it three months). China is a global demand play on the resource sector and the near 30% slide in equity values likely does portend a pullback in basic materials over the intermediate term. Recall that that the Chinese stock market peaked 36 days before the CRB did back in 2008 and it led the upturn in 2009 by 24 days. The lags are a bit longer on the oil price (97 days) but the story is the same.
[Click here for full chart]
Does that mean that you can make money by playing commodities based upon what the Chinese stock market is doing?
Yes, if the relationship holds ...
I am not an investment advisor and this should not be taken as investment advice.