CRB Commodities Weekly Chart QE3 on the Horizon

Keystone references the CRB regularly to gauge when QE3 is coming.  Yesterday was a surprise that additional easing measures were not announced but the deflationary conditions now occurring are not severe enough to cause Chairman Bernanke to act, at least not yet.  Checking Keystone's Inflation-Deflation Indicator we calculate CRB/10-yr price = 272.91/100.922 = 2.70. Under 2.9 is Deflation where the indicator remains for at least three to four weeks now. Deflation is Bernanke's biggest fear since it is represented by the Great Depression as well as Japan's ongoing two decade deflationary battle. Deflation will bring many years of pain. Bernanke should act when Keystone's indicator is in the 2.4-2.6 area, a hair away.

The chart clearly shows the downward channel in place with lower lows and lower highs printing along the way. The 20-week MA is under the 50-week MA which is bearish. The 200-week MA is negatively sloping which signifies a very weak chart. The red lines show how price printed a lower low and the indicators printed lower lows (red circles) except for the MACD histogram which helped create the buoyancy over recent days.  The red circles indicate that a lower low in price is desired to allow the chart to set up with positive divergence to bounce price. When the CRB comes back down into the green box, that should trigger Chairman Bernanke to act with QE3. More likely a coordinated intervention plan is already mapped out so QE3, LTRO3, China stimulus and Japan stimulus should occur at the same time. This will create a new quantitative easing rally move for markets that should last about three months--until right before the election. Projection is for further price buoyancy since the daily chart is long and strong in the shorter time frame, but in the couple weeks or so ahead, the CRB will drop into the box which will cause Bernanke to act with QE3 resulting in a wild upside orgy rally probably into a peak around Labor Day. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your finanical advisor before making any investment decision.