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As you can see when you look at the 90 day correlation between the Baltic Index and the MSCI Global stock market index it is not unusual for it to negative.

The theory is that the Baltic shipping index is a barometer of economic activity and therefore a guide to growth and therefore should be reflected in stock markets which rise when growth does.

As one reader, Pankaj, pointed out the Baltic has fallen sharply recently while stocks have been rising. So does this drop foreshadow a decline in stock markets.

The simple answer is yes, it probably does. As you can see the correlation with the world’s stock markets is negative and has room to move lower but is getting to a level where the downside is limited.

You can see from the lower chart that there are lags between stock market moves and the Baltic with the Baltic tending to lead the markets. This makes perfect sense if you think about it for a moment.

So beware, the background technicals on many of these markets still point to the downside on a longer term basis. This latest dive in the Baltic can only underscore that view.

Thanks Pankaj for highlighting the Baltic’s decline.

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Chart 1 – The technical signals are to the upside in the near term at least. That is signaled by the MACD on the chart but at the same time you can see the RMI and RSI are getting towards overbought and that indicates a pullback.

Don’t forget this is a weekly chart so much longer term than the daily but it is interesting that the dollar trade weighted is getting overbought. That indicated we will see the dollar move higher in the near term, one a weekly basis, but pullback later on.

Chart 2 – As you can see we have reached a critical level at 81.3 and from a technical perspective expect some hesitation here at the very least.

The Show Stochastic is crossing above overbought so expect some pullback and that fits well with the overhead resistance line at 81.3.

So with the Chart 1 and Chart 2 factors in place expect the dollar to retrace on a trade weighted basis for a while but it does look like the much longer term uptrend, in place since the middle of last year, is in place.

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Chart 1 – Pushing ahead nicely as the technicals have been saying but now we are running into some overhead resistance at an old Fibonacci level.

This hesitation also comes alongside an overbought RMI and RSI as you can see so the market is in an over extended condition.

Keep an eye on the MACD which could cross soon and the intermediate term trend could switch to the downside. An over extended market and a downward crossing MACD would see a decent pullback so beware of this if you are long.

As I have been saying, be cautious as it is too early to call a medium term rally anytime soon.

Chart 2 – As regular readers will know we have been looking at this chart for months now but have recently changed the Fibonacci Projection study.

Obvious support and resistance on this chart so I won’t bother to spell out the levels but around 1,140 is critical and a good break of this sets up significant downside. 1,010 is very much on the cards if this level breaks in a big way. The market has broken below the 1,140 level but it closed last week above that level, we need a weekly break close below that level to set up a move down to 1,010.

Resistance at the 1,286 level has now broken with the next very strong overhead resistance pegged at 1,351.

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Chart 1 – A small bounce on that excellent MACD signal but the upper Bollinger Band has provided very good resistance as you can see.

As I said last week this bounce has come after the RSI was showing the market is quite oversold for a while so a bounce back is no real surprise.  However, the overall trend of this market is still down.

Watch for the Slow Stochastic and RSI to indicate periods of short term support and I have marked the latest on the chart.

Chart 2 – The Fibonacci Projection is working well still and we have nearly reached my long standing target of 2088.

Also as I said last week the Alexander Filter was very low so with the RSI in the above chart it was about time we had a small upward correction. This turned out to be the case. Very good signals for the very near term trends.

Chart 3 – The Wall Street correlation has come right off and the Shanghai market is not taking much notice of what it going on elsewhere in the world at the moment.

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Chart 1 – Again not a lot of change technically for oil. The $100 level continues to be key and as you can see we are gravitating back towards it. Just lately the market keeps returning to it again and again.

Good Slow Stochastic signals for the short term trends as you can see although now the study is getting quite noisy so exercise some caution.

The MACD has crossed back to the downside.

Chart 2 – I’ve refreshed the Fibonacci Projection Study on this chart as you can see. The black dots indicate the projection points. See how we are currently bouncing off the 38.2 pct level and if the above indications are corrects we can use this to target 110 which is a level we’ve not seen since May last year.

Keep an eye on the 200-Day Moving Average after the dip below but the RMI came off it’s very overbought level.  The RMI seldom stays above overbought or below oversold for long and is a good indicator.

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Chart 1 – A little bit of hesitation at the triangle down line as you can see. It’s interesting how old lines like this come back into play so it’s always worth keeping them in mind, particularly if you are trading short term.

The MACD signal is very strong to the upside as you can see.

We hit our previous target of 1,500 very nicely indeed. I’ll post the new Fibonacci Projection target next week but the upside target from here is 1,790 by the study.

Chart 2 – The Slow Stochastic has let us down with no pullback in the price action despite it being overbought.

The Bollinger is lending good support and resistance so do keep an eye on it at the upper line.

The RMI is now flirting with the overbought line so bear that in mind a we approach our target of 1,790.

Chart 3 – We could be looking at a typical Dow Curve on the very long term chart. This could be similar to the Nadaq in 2000 where the peak is followed by a consolidation period which is followed by a sell off.

On this dual chart I’ve moved the current gold price action on a weekly chart back in time to 2000 when the Nasdaq turned around.

The Nasdaq pullback was a classic Dow Curve in as much as when a market peaks out after an overblown rally there is a period of consolidation after the peak when the real bears are offset by those who think the pullback is a better level to buy. In 2000 it was a classic and the true believers in the internet miracle fought against those investors who were convinced the whole internet boom was massively overdone.

Massive market rallies, such as we saw on the Nasdaq and more recently gold have to be watched carefully.

I’m not saying we are in the same situation now as the Nasdaq in 2000 but if I were holding gold I’d certainly be keeping it in mind.

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Chart 1 – The MACD signals proved to be the stronger influence with the Slow Stochastic getting noisy about overbought.

Watch out as the market is getting overbought as per the RSI and RMI.

Check also we are now hard up against the 200-day Moving Average and there should been good resistance here.

Chart 2 – As I have been saying there is something significant here with a break of a very important level. The Fibonacci Projection on the weekly shows the vital levels for this market. 4,785 being the most important as a break of this targets 4,187. This is our near term target and given that very nice downtrend line it should not be long in coming.

The very nice downtrend line is also worth watching very carefully. Take a look at this chart and you can see why I am expecting the market to continue to trend lower. That overhead resistance line should be watched very carefully.

Chart 3 – The 30-day Correlation with the US market has broken down and the market is moving under its own steam.

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Chart 1 – The Hong Kong market is getting very stretched to the upside with the Slow Stochastic giving bad signals as you can see.

The RSI is very stretched to the upside now although the move is in line with the MACD upside signals.

So this latest rally was not signaled by the technicals we have been looking at.

All that said, you can see we are now hard up against the 200-day Moving Average and that is going to lend some overhead resistance. In conjunction with the very overbought RSI it is really not unreasonable to expect a correction from here.

Chart 2 – I’ve refreshed the Fibonacci Projection on this chart after the failed triangle breakout we had last week.

The technicals did not signal this latest little upturn but don’t get too excited because the overall and broad decline in place since Q2 2011 is still in place.

The correlation with Wall Street remains high.