Baltic Dry Index (BDI) is very close to giving a relative strength buy signal against the S&P 500.
The much derided but closely watched Baltic Dry Index (BDI) is very close to giving a relative strength buy signal against the S&P 500. Reflexive action and outperformance from important market bottoms often show up in changes in the comparative relative strength relationships.
Buy or sell signals in the relative strength database are indeed the ones to pay attention to as they tend to not only help in identifying superior moves but also stay in place for a long time ? on average for two years.
Take a look at the following chart. Not the type of chart you are likely accustomed to seeing. A little interpretation and simplification. First, ignore the values on the left and right ? they are present simply to help plot the chart and identify buy and sell signals. Concentrate on the columns of Xs or Os. The series of higher highs and upside breaks of Xs shows the Baltic Dry Index outperforming the S&P 500 on a relative basis whereas the series of downside breaks and lower lows of Os shows the relative underperformance of the BDI.
The date of the last BDI/S&P 500 relative strength buy signal? September 7, 2006. The performance of the BDI to the July 2, 2008 top? 194%, versus a 2% decline for the S&P 500.