In parallel with the stock markets, the commodities rally has reached its peak as the CRB Index posted a recent high at 269.18 points during the first fortnight of August. Actually the commodities benchmark has already retraced slightly as its current price is 249.63. That’s 7.3% lower than the high of August.
On the weekly chart, we see that despite the rebound generated in last March, only a small part of the huge decline occurred last year has been retraced…
The rebound is, in terms of percentage, not so impressive. Remember, the plunge last year drove the CRB index from a historical high at 473.97 in early July 2008 (point A on the chart) to a low at 200.16 (point B) in late February this year. This was a correction of 58% that pulled back the index to levels not seen since 2002.
We have plot, between these two extreme points of this bearish trend (between points A and B), the Fibonacci retracement ratios. They typically act as resistance levels for the rally in place. The first one (the 23.6% ratio) has been hit twice during the last 3 months. This level is set around 265 points. In June, the index climbed at 266.17 points and, after a correction in July, it rose back to 269.18 points last month. This was a second attempt to clear the Fibonacci resistance. But it failed another time as the momentum was losing is strength.
The weekly MACD has peaked and already curved downward. It is probable that the correction will continue until the index finds some good support on the downside. The daily MACD has already crossed below its moving average, confirming the bearish outlook on the near term…
It has also posted a bearish divergence as it did not confirm the new high posted by the price action.
The target is therefore on the downside. It may be the level of 230 points (almost 15% lower than the current level) as this is where the index found some support in last July. It corresponds to a previous high (in March and April this year) that became a new low.
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