Commodity Prices Maintain A Bullish Bias On Long-Term Charts
By Jim Donnelly, Olson Global Markets
Although commodity prices, including gold, silver, crude oil and the grain complex, have experienced a modest correction lower since the beginning of the New Year, the bias for commodity prices (as measured by the CRB Index) remains bullish when looking at long-term charts.
On October 12, 2009, the CRB Index broke solidly above key “cross” trend line resistance and has remained above it since. Complimenting the commodity rally were continued dollar weakness and a renewed upward trend in the S&P 500 index at that time.
After an intermediate top was reached on the CRB Index at 293.75 on January 6, 2010, a pullback in commodity prices emerged however. Still, with long-term technical studies currently locked onto bullish signals, commodity prices should generally grind higher from current levels even though the current correction to lower levels may not yet be over. Important to note is that key support for the CRB index now sits at 253.50.
If this bullish scenario for commodities is accurate, the upside “potential” for the CRB Index would be for a potential move up to the “backside” of former trend line support which now sits at the lofty level of 350.
Intermediate and long-term charts favor further dollar strength combined with a near-term pullback in equity prices. This suggests that the correction to lower levels in the CRB Index is not yet over. The longer-term outlook nevertheless suggests that the dollar should eventually reverse lower with the S&P 500 Index returning to a bullish trend. That, however, could take a few weeks or possibly months to occur.
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