A slippery customer

In Europe, meanwhile, the Swiss SMI reverted to its long standing sell signal, and Russia’s Micex returned to the red once again as Western sanctions and the tumbling oil price wreaked havoc. Brazil’s Ibovespa also delivered a new sell signal, albeit somewhat belatedly – while the March buy signal did indeed precede a chunky 22 per cent gain within five months, the index’s peak came in mid-August before a slide back to pretty much where it started 9 months ago. The fall coincided with further weakening of the Brazilian Real against the US dollar, and appears, like the Ibovespa’s fall, to be a reflection of the market’s belief that re-elected president Dilma Rousseff will struggle to reignite growth in the country.

One major concern investors have over Brazil is that, like Russia, its economy is underpinned by natural resources, and its market dominated by major state-controlled producers. Together oil & gas producer Petrobras, which has shed two-thirds of its value since September, and miner Vale, which has halved, account for 15 per cent of the index by weight. With little end in sight to the rout in oil and iron ore prices these index sells may still be worth heeding.

S&P Goldman Sachs Commodity Indices

We do track a basket of commodities using our Coppock indicators, so given the incredible sell off we have seen in the oil price over recent months – essentially halving in three months - it is perhaps worth recapping what they are now telling us. In fact, two of the commodity total return indices we cover have given new signals this month: Goldman Sachs’ livestock index, which flashed sell after a strong run, and GS industrial metals, which flashed an unofficial sell (or, as we now describe it, a cancelled buy) after holding its ground surprisingly well this year. That brings them into line with GS agricultural commodities and, unsurprisingly, GS crude oil. GS precious metals and gold bullion are both buys according to Coppock, and have been so since February last year – and while precious metals have hardly set the world alight this year, they have held their value rather better than crude, and enjoyed something of a bounce in recent weeks as the latest eurozone troubles have sent investors rushing for safe havens (the fixed income indices we track are similarly all giving buy signals). It’s a trend we can see continuing for some time yet.

December’s Coppock signals

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