Thursday, 29 March 2012

Oh oh...Commodities are breaking below support

Alright, now, first of all, lets note the mild case of hysteria across the various boards/sites the last 2 days. It is crazy in that even though we are just sp'14pts from the recent top, many posters are massively bearish, especially for the very near term.

The main weekly and monthly equity cycles remain bullish, as they have been since the October low.

However, this evening I have noticed the following two commodity related charts that I've mentioned a few times recently. Both have now broken key levels...and are warning of trouble.

CRB, weekly

It was a clear bear flag that's been developing since Christmas, and so far this week we have a marginal break to the downside. We won't know for sure unless we can hit maybe 305/300. A break under the recent low of 290 would be a severe warning.

CRX, weekly - commodity related stocks

Now this is something I follow even more closely than the CRB. We have broken the October trend/channel line. It is important to note that it could still be a bull flag - in which case, we need a move back above 960 - which is 10% higher. That 10% higher is just to get back into a bullish phase, and frankly, that's asking quite a lot.

*note the MACD (blue bar histogram) cycle which WILL - baring a bizarre ramp on Thursday/Friday, go negative cycle next week. A potential major snap lower is very viable next week.

Some very mixed signals at the moment

Despite Wednesdays fall in the market, of which half the losses were reclaimed, the VIX still managed to collapse in the last hour to close red. So, where is the fear in this market?

The world indexes look pretty oversold on the daily cycles, it would be very natural for them to recycle back upward next week.

Yet, the two charts above are something I've been touting as 'things to watch for', and here we are with both flashing preliminary warnings. Confirmation for a major move to the downside would be next week.

*Equity 60min cycles are floored (as noted in an earlier posting), so we'll need to see what the bulls have, can they break a new high? we put in a slightly lower high at the top of the next cycle, 1415?

A question to ponder for Thursday...

Q. Are commodities the first warning?  We might well see sp'1440 - whilst commodities continue to show weakness...and then...equities follow within a week or two.