The Baltic Dry Index is usually a good first sign of future stock market direction, and I pay attention to it. But there is now a disturbance in the force that makes it so reliable as recent stories in the WSJ and CNBC have pointed out. Three years ago, when the BRIC ports were insatiable, a frenzied boat building spree got under way. Now the recession has cooled that appetite and the 3 year lead time for getting boats in the water has a gross over supply messing with the rates that the BDI goes by - making the index overly bearish looking.
As I wrote in the previous post on market leader groups, the BDI is currently the bearish one. So if you discount its effectiveness until the boat situation normalizes, that leaves a much more bullish picture of rotating leader groups in a stabilizing bull market. As Cramer opined on his show today, the financials were the most severe climbers in the bottom gyrations of a year ago, but have lagged over the last few months, letting retail and other things steal the show for awhile. But after a very bearish island reversal that fell back below resistance back in October, the XLF is threatening to bust that resistance and be the star again: (click to enlarge)