{"id":164903,"date":"2020-02-12T17:54:08","date_gmt":"2020-02-12T22:54:08","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=164903"},"modified":"2020-02-12T17:54:08","modified_gmt":"2020-02-12T22:54:08","slug":"shipping-rates-plunge-commodities-and-stocks-may-follow","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2020\/02\/shipping-rates-plunge-commodities-and-stocks-may-follow\/","title":{"rendered":"Shipping Rates Plunge, Commodities and Stocks May Follow"},"content":{"rendered":"
February 12, 2020<\/div>
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By TheTechnicalTraders<\/u><\/a> <\/strong>– An almost immediate reaction to the Coronavirus outbreak in China and throughout most of the world has sent shock-wave through the global markets \u2013 particularly seen in Shipping and Oil.\u00a0 The actions within China to attempt to contain the virus spread include shutting down entire cities and setting up mass quarantine events.\u00a0 It is estimated that as many as 8+ million people were quarantined within cities in China throughout the Chinese New Year.<\/p>\n

Chinese President, Xi Jinping, warned recently that the Coronavirus, and the efforts to stop it, may greatly reduce the Chinese economy over the next few months.\u00a0 The Chinese President urged top officials to refrain from \u201cmore restrictive measures\u201d to contain the virus.\u00a0 It is our opinion that more restrictive measures are essential to efforts to contain the spread of this virus and that further contraction in the Chinese economy, as well as other economies, are almost set in stone at this point.<\/p>\n

Information we\u2019ve received from some friends living in China and Hong Kong suggest travel is very restricted, face masks are very scarce, people are staying inside their homes and surviving as family units within very close contact with one another.\u00a0 They are scared, trapped and unable to do anything other than try to wait this out.\u00a0 Imagine what this is doing to the local economies, shops, offices, and businesses?<\/p>\n

Reflectively, global shipping rates have collapsed over the past 30+ days as one of the first signs of the contraction in the global markets.\u00a0 As of December 31, 2019, both Tanker and Dry-Bulk rates were hovering near $14,000 per day.\u00a0 Now, this rate is near $2500 per day \u2013 a -82% decrease.\u00a0 As you consider the broader aspects of this massive decrease in shipping rates, consider the global contagion event that may setup if the Belt-Road region is adversely hit with the Corona Virus.<\/p>\n

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Source: Bloomberg.com<\/a><\/p>\n

SEA Shipping Sector ETF \u2013 Daily Chart<\/h3>\n

Shipping stocks are taking a beating. Factories are shut down, the product is not being shipped, and even product ready to be shipped many don\u2019t want to take delivery for the time being.<\/p>

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From a short term standpoint, this sector is looking oversold, but depending on how much the virus spreads we could see another 20% from the current price.<\/p>\n

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China\u2019s Belt-Road Infrastructure Projects<\/h3>\n

China\u2019s Belt-Road Initiative consists of massive infrastructure, port, and other projects throughout Europe, Asia, India, Pakistan, Iran, Turkey, Russia, Africa, and other nations.\u00a0 These projects have been initiated over the past 5+ years and are well underway.\u00a0 We believe the spread of the Coronavirus may follow a path along with the Belt and Road projects and potentially infect a larger number of individuals over the next 30+ days than originally expected.\u00a0 If this virus moves into the Middle East or Africa, containment may become very difficult.<\/p>\n

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The reality is that Shipping and Commodities could see a dramatic price decline as this virus outbreak continues over the next 60+ days.\u00a0 Reports are already starting to hit the news wires that Autos and manufacturing supplies are starting to pile up and ports in China.\u00a0 Without a functioning manufacturing sector and workers to keep everything running, China\u2019s economy will grind to a halt very quickly.<\/p>\n

This translates into lower Oil prices, lower raw material prices and higher metals prices.\u00a0 A capital shift will continue to take place throughout the world where capital will move away from risky environments and towards more secure investment environments.\u00a0 Thus, capital will move away from Asia, India, the Middle East and potentially Europe and towards the USA, Canada and possibly Mexico.\u00a0 Everything depends on what happens over the next 60 to 90+ days with regards to this virus outbreak.<\/p>\n

Monthly Crude Oil chart<\/h3>\n

This Monthly Crude Oil chart shows how quickly Oil rotated lower in January 2020.\u00a0 Currently, Oil is trading near $50 per barrel and may break lower towards the $44 to $46 price level before finding any real support.\u00a0 Overall, our research team believes Oil may reach as low as $35 to $36 ppb before reaching a bottom.\u00a0 You can read our earlier research here: https:\/\/www.thetechnicaltraders.com\/oil-begins-to-move-lower-will-our-predictions-come-true<\/a>.\u00a0 Within that research post, dated November 19, 2019, we highlighted our earlier predictive modeling research from July 2019 suggesting Oil would break substantially lower in November 2019 and again in February 2020.\u00a0 We predicted this downside move in Oil nearly 8+ before it happened.<\/p>\n

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Transportation Index Monthly Chart<\/p>\n

This Transportation Index Monthly chart highlights the sideways FLAG formation setting up in the US Transportation sector.\u00a0 If the US market breaks lower as a result of lower global economic activity, we believe we will see the Transportation Index fall very quickly to levels below $9,500.\u00a0 A breakdown in the Transportation Index would be an early warning sign that the US economy is headed towards a recession or contraction event.\u00a0 Global shipping has already confirmed this event is taking place \u2013 yet the US Transportation sector has not shown much weakness.<\/p>\n

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Traders need to be very aware of the risks in the markets and the continued Capital Shift that is taking place throughout the planet.\u00a0 Capital is running away from risk and pouring into more stable markets.\u00a0 The ultimate risks to the global economy are for those nations where debt\/economy levels are fragile, to begin with \u2013 which is why we highlighted the Belt Road project.\u00a0 If China enters a protective mode where the Chinese Central Bank attempts to bail out Chinese companies\/initiatives, we believe the Belt Road project could become a great risk.\u00a0 And we believe this could happen very quickly given the current market environment.<\/p>\n

The dynamics of global markets are changing very quickly.\u00a0 It is time for traders to prepare for bigger volatility and large range sector rotation.\u00a0 Follow our research, learn how we can help you stay ahead of these bigger moves in the markets.\u00a0 2020 is going to be a fantastic year for skilled traders \u2013 you just have to stay ahead of the risks and be prepared to take advantage of the opportunities as they are presented.<\/p>\n

Join my\u00a0Swing Trading ETF Wealth Building Newsletter<\/strong>\u00a0if you like what you read here and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own.<\/p>\n

Chris Vermeulen
\nTheTechnicalTraders.com<\/u><\/a><\/strong><\/p>\n

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NOTICE: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research.\u00a0 It is provided for educational purposes only.\u00a0 Our research team produces these research articles to share information with our followers\/readers in an effort to try to keep you well informed.\u00a0 Visit our web site (www.thetechnicaltraders.com) to learn how to take advantage of our members-only research and trading signals.<\/em><\/p>\n

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 <\/p>\n","protected":false},"excerpt":{"rendered":"

By TheTechnicalTraders – An almost immediate reaction to the Coronavirus outbreak in China and throughout most of the world has sent shock-wave through the global markets \u2013 particularly seen in Shipping and Oil.\u00a0 The actions within China to attempt to contain the virus spread include shutting down entire cities and setting up mass quarantine events.\u00a0 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-164903","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/164903","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=164903"}],"version-history":[{"count":1,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/164903\/revisions"}],"predecessor-version":[{"id":164904,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/164903\/revisions\/164904"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=164903"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=164903"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=164903"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}