Saturday 27 July 2013

Which way for commodities?

Whilst the main US equity market continues to rise, the commodity market is still lagging, and slipped a rather significant 2.2% this week. The CRB looks set for a major breakout within the next few months, as ever...the only issue is..which direction!


CRB, weekly



CRB vs SP'500


Summary

For the CRB, you can clearly see the mid-term trend is still to the downside - from the spring 2011 peak, and we've seen this down trend reflected in this past weeks decline.

The break levels are pretty clear...

Inflationists should be seeking CRB >300
Deflationists .. <270.

A few weekly closes above either level, should provide good initial confirmation for where commodities are headed into 2014.
--


RE: Commodities vs the SP'500

The discrepancy is indeed severe, and at some point the two are going to re-sync. The only question is whether commodities play catch up to equities, or equities drop like a rock - or a combination of the two.

Considering that QE is likely to continue into 2014 (if not 2015/16), best guess would be that commodities will eventually start to ramp, although not necessarily at a rapid pace relative to rising equities.

--
more later today...on the US weekly indexes