A correlation between CRB index, Dow and VIX shows Stock market ready to plunge in January 2007
Peter Oberois
Dec. 8, 2006

The stock market is ready to plunge in January 2007. An analytic model that correlates the CRB index, the volatility index VIX and the Dow shows severe downside risks in stocks.

With an eighteen months delay, exponentially normalized CRB index differential of 25% or higher tends to dictate the direction of stocks. However, the movement in stocks becomes dominant if VIX the volatility or fear index of Wall Street is low. The trend is observed only when there are major (25% or more) movement in CRB index.

Over decades stocks and bonds have sometime gone in the same direction and some time in opposite direction. But the CRB is ahead of stocks by approximately one and half years.

It make sense in fundamentals too. Stock market is guided by profitability. A sharp rise in CRB index means higher raw material cost. That, if significantly higher causes a major problem for corporations. It is not easy to raise the output price with lowering demand. This translates into lower profits over a long period of time.

A correlation between CRB index, Dow and VIX shows Stock market ready to plunge in January 2007
Peter Oberois
Stock market is guided by profitability. A sharp rise in CRB index means higher raw material cost. That, if significantly higher causes a major problem for corporations.
READ MORE>>

Unemployment data ready to reveal economy stronger than many thinks but a major recession is eminent
Sam Adelton
The unemployment data will be surprisingly strong because of early Thanksgiving and late survey of last month. The real estate gloom is spreading fast in the labor market but this report will show stronger job growth than the consensus.
READ MORE>>

European Central Bank President Jean-Claude Trichet signaled he's in no rush to boost interest rates – bullish for dollar?
Preity Gallop
ECB feels the rates are low enough to help dollar recover grounds and Euro Zone to keep growing. At the same time ECB is in no hurry to raise rates as US economy have started to slow down.
READ MORE>>

Initial claims will fall by a massive 37,000 led by the service sector growth – bullish for dollar bearish for bonds and an opportunity to short stocks
Alan Hershey
The stock market is peaking for the last two months will lower momentum, lower VIX and higher insider sales.
READ MORE>>

Insider stock sales surges to highest since 1987 stock market crash – Dow can tumble 2000 points in a month
Fred Day
If history will repeat, the Dow can be in the 7500 area by early 2008. The bear market will probably start in the first or second quarter in 2007.
READ MORE>>

Strength in US Service sector growth and weakness in Manufacturing - bullish for dollar and bearish for gold, oil and other metals
Sam Adelton
Iraq problem will have a political solution fast. US budget deficit and trade deficit will shrink like never before. The gold will retest the $400 an ounce. The oil will back down to $40 a barrel.
READ MORE>>

Richest 2% of adults in the world own more than half of global household wealth : World Institute for Development Economics Research of the United Nations University
Media Release
The richest 2% of adults in the world own more than half of global household wealth according to a path-breaking study released today by the Helsinki-based World Institute for Development Economics Research of the United Nations University (UNU WIDER).
READ MORE>>

MORE ARTICLES >>