Thursday, July 28, 2011

CRB Index Update

Click on Chart to Enlarge

The CRB commodity index, I believe, is most likely consolidating at a resistance level before starting another leg down. Oil has a very similar look to this chart, and I believe the next downward phase is likely to exceed the June lows. The dashed red line on the chart above is the projection in the future of the first high to low downward phase (the solid red line). If you look at the daily stochastics on the CRB you will see that it has made a full cycle back to overbought and has had some consolidation at the high. So we could see a sharp break down any day now.

The US Dollar index is at a minor support level and so may bounce soon which should correlate inversely with commodity prices. The hourly chart on silver has made nice bearish divergence on this little push to new rally highs the last couple days. It may have completed its counter trend advance before a large move down. There was a bearish engulfing candlestick pattern a couple days ago which adds some daily chart confirmation to this idea.

I don't have much new to mention regarding stocks. I will say that there are several charts that I have seen on individual stocks that looked set for a bottom to be in place, which failed the last couple days. Often times a break through a harmonic support or resistance zone is a signal that there will be a continued large price movement in the same direction. So I am still leaning toward the market weakening here, with likely acceleration downward in the not distant future.

That being said, the move down the last couple days has not given the confirmation I would want to see to validate the pattern I suggested in recent posts. So the pattern may not be complete. I would not be surprised to see a relief rally very soon here.

The next nice trade opportunity may be a fade (trade against) of any sharp initial move after resolution (or non-resolution) of the debt ceiling news.

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