Over a year ago we posted the following report suggesting the cyclical downturn in the Shipping industry was ending: https://caldaro.wordpress.com/2012/09/27/dry-bulk-shipping-industry/. It bottomed right around the time of the report.
Since that September 2012 low at BDI 661 shipping rates have more than tripled to Friday’s high of BDI 2176. Not only have rates tripled in value, but the progression was a bullish five wave pattern. In the previous report we had identified a 13 year cycle: nine years generally rising and four years generally declining. The nine year rising part of the cycle was also divided into a five year rise, a one year decline, then another three year rise. Since shipping rates hit a cyclical low in 2012, they should continue to generally rise for the next four years. The very clean five wave pattern and the five year rising part of the cycle are quite bullish for this industry.
One would think after a five wave pattern completed a significant correction should follow. And this is the reason for this report. Not only do we think this correction will not occur, but that the five wave pattern is likely to extend higher.
Recently we reviewed the last nine year rising phase of the cycle. Specifically the rise from 2005-2008. It was also a five wave pattern, but the waves gradually subdivided into an extended advance. What caught our attention was the RSI oversold conditions during Major waves 2 and 4. Clearly they were the two major lows during that advance. Reviewing the currently weekly chart, from 2012, one will notice a good oversold condition during Major wave 2. But nothing similar has occurred for what would be considered a Major wave 4. As a result, we do expect the BDI to continue on with its bull market. Until the last uptrend follows another good oversold condition. Under this scenario it is possible to see rates double yet again before this bullish phase ends. You can follow the BDI along with us using this link: http://stockcharts.com/public/1269446/tenpp/9.