Major Turning Point

I do believe we are witnessing a major turning point in world equities markets with commodities soon to follow. Below is the chart of the Hang Seng index. That looks like an island reversal, confirmed by last nights session in Hong Kong where the Hang Seng was down a massive 5%, over 1500 points. At the largest scale, the world has witnessed a dramatic reversal of political freedoms in many areas. Russia is returning to an autocratic form of government, China still is, Latin America has turned dramatically left, coups in Thailand along with uncertainty and chaos in Pakistan. This plays off against the historic transformation of Asia where hundreds of millions of people are becoming consumers for the first time and the global rationalization of labor markets, which has kept the prices of goods low and raised productivity globally. Zooming the scale into the more immediate, the employment report on friday was lipstick on a pig. Looks cute, but when you look more closely, it masked weakness. If we have a sharp downturn here, it will affect the ROW, talking heads notwithstanding. This will infect China, with whom we have a symbiotic relationship, negatively. Demand at the margin, where prices are made, will diminish for commodities for awhile and prices will retreat. The upside objective for Crude of $100 has nearly been met. Will it push a few dollars higher? Maybe. But I believe the odds are that it is time to start becoming bearish generally. Probably 70-30.

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