Many commodity prices have been rebounding since last December and more sharply since March. Base metals, energy and agricultural products were the beneficiaries of a rise of risk appetite from investors, which also benefited to the global equity markets.
What are exactly the amplitude and the intensity and of the global rebound on commodities? The analysis of the CRB index should gives us the answer.
Since December, broadly speaking, the price action of the CRB index has been moving in a consolidation phase. This consolidation phase is following 2 important trends identified since August 2007.
The first trend was a strong bullish trend that started in August 2007 and ended in July 2008 (points A and B on the chart). During this period, the CRB index rose by 58% from 300 to 474 points. The second trend was the huge plunge occurred between July 2008 and February 2009. The index declined from the historical high of 474 points to a low of 200 points (points B and C).
The current price of the CRB is 243 points, which means that the index has rebounded by 21.5% since the low of February. It has just reached a previous high point (point D) and this may create a double-top pattern. As you probably know, a double-top is a trend reversal pattern as the twice touched high is considered a resistance level.
There is also above another potential resistance level that corresponds to a previous low (point E) posted in October 2008. The area between 240 and 255 points may be consequently a completion zone for the current bounce.
The technical indicators are not oriented in the same way. The momentum indicators are positive and suggest a further rise (for example the MACD that triggered a bullish signal recently). On the other side, the oscillators do not confirm this and suggest an overbought configuration. The 50-day CCI (Commodity Channel Index) and the RSI have peaked and already curved downward. They argue for a retracement.
Those contrarian signals argue for a near completion of the current trend and for a correction to come. Because the momentum indicators are not at extreme levels, the correction should be modest and drive back the CRB towards 230 points in a first time.
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