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The Conspiracy Theorists May be Right

By Jeff Clark
Tuesday, April 23, 2013

 Everyone is awaiting this Friday's GDP report.
 
Bullish analysts are predicting the economy grew more than 3% last quarter. Other folks are saying the number is closer to 2.5%. And then there are the conspiracy theorists who say no matter what sort of number the government comes up with, the economy is contracting.
 
The conspiracy theorists may be right...
 
According to the three Cs of economic activity – copper, crude oil, and Caterpillar (NYSE: CAT) – the economy is in a recession...
 
 The price of copper is an indicator of economic strength or weakness. Its cliff dive over the past three months points to serious weakness in the economy.
 
Price of Copper per Pound, May 2012 - April 2013
 
 The decline in crude oil isn't as steep as the decline in copper. But if the economy was growing at 3% or more, you might expect the price of crude oil to rally. Instead, it's down 10% in just the past few weeks.
 
Crude Oil, Price per Barrel, May 2012 - April 2013
 
 Lastly, as the biggest equipment manufacturer on the planet, Caterpillar benefits from a strong economy. But the stock is down 15% since February. The company disappointed investors with a weak earnings report yesterday – its third consecutive weak report.
 
Price per Share of Caterpillar (CAT), May 2012 - 2013
 
Maybe the economy isn't as strong as so many economists seem to think it is... We'll find out on Friday.
 
Best regards and good trading,
 
Jeff Clark
 




Further Reading:

Another cyclical industry is in "bust" mode today. By itself, this bear market is not cause to sell everything and expect a recession. "But this severe plunge should also raise some red flags," Brian Hunt writes. "It could be an early warning sign that the global economy is getting weaker and weaker."
 
On the other hand, if the economy holds together, this industry will bottom... and these beaten-down stocks could soar. Get the full story here.

In The Daily Crux
Market Notes
Gold, silver, copper, and platinum are down 15%-plus over the past three months.
 
Biotech giants Amgen and Gilead soar to fresh all-time highs... both are up 65%-plus over the past 12 months.
 
Coal producers break down... Peabody Energy and Walter Energy touch new multiyear lows.
 
Dividend-paying drugstore chain Walgreens surges to a new all-time high.
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Market Watch
Symbol Price
Change
52-Wk
S&P 500 1562.50 +0.5% +13.4%
Oil (USO) 31.82 +1.4% -19.2%
Gold (GLD) 137.90 +1.8% -13.6%
Silver (SLV) 22.62 +1.0% -26.4%
U.S. Dollar 82.63 -0.2% +4.4%
Euro 1.31 +0.4% -0.9%
Volatility (^VIX) 14.39 -3.9% -17.5%
Gold Stocks (^HUI) 272.41 +1.5% -38.4%
10-Year Yield 1.70 +0.0% -13.7%

World ETFs
Symbol Price
Change
52-Wk
Japan (EWJ) 11.33 -0.1% +18.7%
USA (SPY) 156.17 +0.4% +15.7%
Singapore (EWS) 13.88 -0.5% +12.4%
Taiwan (EWT) 13.54 +0.0% +8.1%
India (IFN) 20.84 +0.4% +6.9%
Israel (ISL) 14.20 +0.0% +5.1%
China (FXI) 36.22 +0.5% -2.1%
Canada (EWC) 26.71 +0.1% -2.3%
S. Korea (EWY) 55.88 +1.2% -3.8%
Lat.America (ILF) 42.13 +0.1% -6.2%
S. Africa (EZA) 60.91 -0.8% -6.8%
Russia (TRF) 13.90 -0.2% -13.2%

Sector ETFs
Symbol Price
Change
52-Wk
Construction (PKB) 18.87 +1.1% +39.0%
Media (PBS) 19.83 +1.2% +35.9%
Health Care (IYH) 100.58 +0.5% +31.9%
Biotech (PBE) 28.15 +1.0% +28.4%
Telecom (IYZ) 26.16 +0.4% +24.5%
Consumer Svcs (IYC) 98.59 +0.3% +23.7%
Utilities (XLU) 40.68 -0.1% +20.9%
Financials (IYF) 67.41 +0.1% +20.7%
Real Estate (IYR) 71.96 +0.1% +19.5%
Insurance (PIC) 19.01 +0.1% +18.3%
Transportation (IYT) 107.57 +0.1% +16.6%
Defense (PPA) 22.43 +0.0% +15.9%
Water (PHO) 21.45 -0.2% +15.5%
Industrials (IYJ) 78.80 +0.2% +14.2%
Retail (PMR) 28.36 +0.7% +13.0%
Software (PSJ) 28.70 +0.4% +7.7%
Big Tech (QQQQ) 68.79 +1.0% +6.1%
Nanotech (PXN) 6.45 -0.3% +4.9%
Basic Mat (IYM) 67.33 +1.0% -1.2%
Semis (PSI) 14.62 +1.5% -3.5%
Alt. Energy (PBW) 4.36 +1.6% -11.7%