In some cases, investors have the ability to predict the dynamics of asset prices using a variety of technical and fundamental analysis. There are, however, indicators that are positioned as ahead of the market. It is believed that they can be used not only to assess the price movements of individual assets in the future, but also to predict the crises in the financial markets. So, for example, the sea freight index the Baltic Dry “index of fear” Volatility Index and some stock indices. found out how effective the predictions for these benchmarks.
To follow the ships
The Baltic Dry index, reflecting the average freight cost and tracking changes in the prices of marine transportation around the world, calculated by the Baltic exchange in London since 1985. Until recently this index was considered to be one of the leading indicators of the world economy, in theory allowing to predict the market in the short term. So, a few months before the outbreak of the global financial crisis, the index has fallen by 94%. While the cost of dry goods from the estimated base of the indicator rose steadily until the beginning of the crisis. Like predicted the crisis, the collapse index showed before the black Monday of 1987, notes editor-International Business Times Jeffrey Rothfeder in his article for The New Yorker.
“About 90% of all transportation is carried out by the courts. Problems with this index can indicate problems in the global economy,” says associate Professor of the faculty of Economics, HSE Henry Penikas. Penikas does not believe that this index will be objective in all cases. Agree with him and other experts interviewed. So, the managing partner of the trading company United Traders Anatoly Radchenko believes the index is “dead” since the 2008 crisis. “Shares of the shipping companies engaged in dry bulk carriers, fell by 90% and are near historical lows, says Radchenko. — My colleagues often look at ETFs and futures”.
Deputy General Director of IC “Zerich capital Management” Andrey Vernikov also considers that the practical use of BDI is now equal to zero. “Someone is looking for forward-looking solutions, whether BDI or the price of copper (the copper drop says about the problems in the world economy). They have a theory: if the stock market rally and the indices it do not confirm, then will be a reversal. But to predict when and in what direction the course will unfold, it is impossible,” he says.
As of may 3, 2017 the index was estimated at 1073 points. According investing.com in February last year, the index renewed its historical minimum, down to 290,85. However, a new economic crisis not ensued. “This was followed by the bankruptcy of one of the shipping companies world leaders (Hanjin Shipping). According to the results of the first half of 2016, 11 of the 12 largest shipping companies announced losses, explains Henry Penikas. — January 11, 2016 in the ocean the whole day there was not a single vehicle in the path. This coincided with the turbulence of the global stock markets due to concerns about stopping the growth of the Chinese economy.”
The index of fear
The volatility index (Volatility Index, VIX) the Chicago Board options exchange measure of market expectations regarding short-term volatility based on changes in the prices of options on stock index S&P 500. The higher the index, the worse things are going on the market. “This index is also called the “index of fear”, — said Radchenko from United Traders. In his opinion, this index is not able to predict guaranteed changes in the market, but can tell the moment when the market will accelerate. The expert also shared the small trader the trick for the speculators. “If the VIX is above 20 pips, then the market is money and volatility. Once the index drops below 20 points, you need to reduce your positions, trades and risk,” he explains. Now the index is at the level of 10.71 points. Since the beginning of the year, it fell 19.98%.
Opinions Radchenko has not shared the Director for investments UK “URALSIB” Sergey Grigoryan. He believes that the VIX index has managed to discredit itself. “The last few years because of the policies of the Central Bank of the United States and Europe risk assets are losing profitability. Because of this, the VIX index is now near its historic lows. VIX can be considered as the indicator of fear of market participants, but, in my opinion, the current fundamental situation does not meet the minimum level of investor fear,” — says the financier.
“Useful” of the country and raw materials
Andrei Vernikov of the IR “Zerich capital Management” notes that the investors operating on the Russian market, can help to predict its dynamics, the index of developing countries MSCI Emerging Markets. In the words of Vernikova, global investors treat Russia the same way as other developing countries, when the index begins to fall, then it is corrected and the Russian stock market. “It reflects the changing attitudes of investors towards risky assets,” — explains the expert.
In turn, Sergey Grigoryan from UK “URALSIB” uses the MSCI Emerging Markets index in Intermarket analysis (a form of technical analysis that studies the relationship between the main classes of assets). For example, the financier calculates the ratio of this indicator to the index of developed countries. It helps him to predict fluctuations in the stock market of Russia. “If the Russian market grows, and the ratio falls, it indicates that this growth can be short and quick to go on the decline”, — the expert explains.
Andrei Vernikov also advised to monitor the dynamics of the index of the largest oil companies in the Amex Oil Index, which includes such industry giants as Chevron, Occidental Petroleum, ExxonMobil and Royal Dutch Shell. “When you start the lateral dynamics of the AMEX oil and gas, our markets are also starting to go sideways,” says the financier.