Sheep, Milk and the Kiwi …
In New Zealand, there is roughly 7 sheep to every person. They have a lot of sheep and sheep = cotton, correct? The country has the highest density of sheep per capita in the world. However, this year has seen the sheep numbers fall to their lowest level in 75 years.
Around 1987 farmers to took to dairy farming and that overtook conventional sheep farming which until then had been the backbone of the New Zealand Economy. Take a look at the chart below … at most inflection points in Cotton Futures the KIWI followed suite.
As discussed above, the dairy industry is the backbone of the economy. Prices have plunged.
Below is a chart showing Class III Milk future w/ the KIWI overlaid on top of it. Note, milk futures have completed a buy pattern so prices “should” start back up and therefore KIWI can potentially find some support. Emerging Market Currencies are at an extreme low w/ regard to sentiment.
The next chart below is of Non Fat Milk futures (continuous monthly) and note the synchronization of tops and bottoms. These are the lowest prices in decades ….
Here’s the KIWI today … decimated sentiment for EM Currencies, RECORD low dairy prices, cotton hanging in there and a big old thump into very oversold bullish divergence .. it’s going to start up today or soon.
so this looks so PROMISING but when I put the EEM (Emerging Market ETF) w/ the KIWI overlaid on top of it I see a very nice symmetry BUT I also see a CLIFF OF SUPPORT that the EEM is about to fall off. OUCH ….