Early Global Deflation Signs Beginning

Hope your week went well and that you adapt well to change because there’s been a lot of changes starting to show in the worldwide markets and trends.

This has been an excellent week in which to confirm the early rumblings I mentioned in earlier blogs.

Like the one warning about something weakening in the Asian Markets given back in December.

Well, by this week, I guess even the skeptics must be feeling a little uneasy about the Asian bailout option. You can just feel the hope of Asia saving the world economies fading away with each passing news day can’t you?

The Asian Stock markets are just the tip of a global iceberg of overbought stocks and indexes. Actually, iceberg is a good metaphor as we’re definitely seeing signs of cooling taking place after a heatwave of upward price momentum in many markets including stocks.

Here’s what I see out there at present. First, the basics, always the basics.

Are we in an inflationary or deflationary state right now?

There’s been plenty of speculation on both sides.  I noted last year myself that we were still experiencing upward price movement in many basic commodities like oil, metals and other markets.

Well, thats finally changed in enough markets now to even affect the CRB commodities index.

The CRB Index  is a good guide to the price market for a variety of items consumers need and use.

Note the chart of the CRB.

The CRB Index is mostly USA oriented, but commodity prices affect imports and exports of goods and raw materials worldwide.

Carefully measured then, this index can give us early clues about the real economic conditions here and elsewhere in the world.

I mean the ‘real’ conditions. The ones that lie way beyond the political smoke that’s blowing like from a volcano from the governments of the world.

It sure looks to me that deflation (declining prices) is starting to be expressed over a broad array of markets and goods this time around.

Here’s the list as I see it presently:

There’s the decline in Gold prices.

Global Stock Market prices have started to tip over the edge.

Most major currencies that used to be strong are weakening (like the Euro and Australian Dollar) compared with the US Dollar which is strengthening.

Cocoa and Coffee which have inflated their prices greatly since late in 2008, have broken their upward trends and are heading lower. Hot chocolate, coffee and candy will eventually respond to these decreasing prices. Sweet!

Copper, which has been one of the worst of inflationary metals, has also broken it’s up trending price momentum. this is one of the powerful indicators of inflation or deflation in the economy.

Cotton, Corn, Soybeans. Important items all and also now declining in price at the wholesale end.

Heating Oil.

There’s another major wave of mortgage debt consolidation coming and peaking in July for 2010 with another surge next year. So, there will be more crises ahead.

Crisis is normal in the process of Life and Economies. It’s the poor responses to these events that has posed the greater threat and the greater thief to prosperity these last 2 years.

If prices keep trending downward on consumer items and necessities, it will take some of the pressure off from the populace and give all of us some pause and time to reflect on our best course of action going forward.

Trading is one way to respond. There are always excellent opportunities in discovering trends early, climbing on board and prospering while others are wringing their hands.

There are cautions when contemplating trading. Read my disclaimer and risk disclosure pages to educate yourself in this regard.

All opportunities entail risk. That’s how it works.

Have a great weekend. We’ll be discussing some Forex charts of interest and Gold in the upcoming blogs.

- George

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