CRB Commodities Weekly Chart Sideways Symmetrical Triangle Quantitative Easing Effects on Commodities

The commodities are in a period where a major decision is about to occur. Price continues out the multi-year triangle becoming squeezed more and more with time.  The apex of the triangle is May, when the debt ceiling limit comes around again. Thus, the stock and investing world is in for an interesting ride, a ride that ends soon, with a very strong move down into the disinflationary and deflationary bear camp, or, strongly up into an inflationary bull camp with Treasury yields moving higher as well. The markets are polarized right now. Equity traders are either firmly bullish, or, firmly bearish. The middle ground is disappearing, soon there will be a winner crowned.

The chart shows that a couple more bumps of the top and bottom rails may occur from now  thru March or April before the real move occurs. Look at how tight price and the moving averages are further verifying complete sideways non-directional indecision. The daily chart is the same.  A slight edge is given to the bulls (green lines) moving forward. Either the top rail at 315 or the bottom rail at 290 will choose the winner. To add to the theatrics, CAT reports in the morning. Despite the huge economic data and earnings on tap for the week ahead, including the FOMC Announcement and Monthly Jobs Report, the CAT numbers in the morning may be the key release of the entire week. As soon as CAT releases, oil, copper and commodities will move accordingly. Great CAT earnings shows that the analysts predicting no pull back for China are correct and there will be nothing but blue skies ahead. Commodities will rip higher towards a breakout of the triangle and the SPX will be on its way to the 1520's. The wine will flow like water.

Note the effect on commodities from the five major global quantitative easing actions thus far. QE1 and QE2 were big pumps, all that free easy money had to flow somewhere and the commodities were the recipient all t he way up into the 2011 bubble.  The third easing was Operation Twist and the ECB's LTRO Program that saved the day in late 2011 and created the market orgy this time last year. Note how commodities are less and less impressed with the money pumping as time moves along. Over time, the phoniness of easy money is exposed and there is no reason to buy commodities since the recovery is faux and not due to fundamental reasons but rather due to the printing presses running 24/7 in the basement of the Eccles Building. The fourth major easing started last summer when Draghi pledged to support the euro and announced OMT, and Chairman Bernanke chimed in with QE3 Infinity, a coordinated global intervention. CRB ran on this pump.  Then in December, the Fed continuing to throw the kitchen sink at the flailing economy, announces QE4 Infinity and Beyond. This is creating some further buoyancy lately but the big picture tells the story. Print all you want but the commodities do not seem to be biting anymore. The free money, however, is fueling the current high-yield and dividend stock bubbles that are prime for popping now.

If CAT earnings miss, or if the guidance forward is lackluster, commodities will move lower and the bears will finally have a turn at moving equities lower.  Keystone continues to project the disinflationary side forward and would expect an ultimate move out the bottom of the triangle, but, in these markets with momo pushing higher, this is definitely a contrarian projection. CAT may change the landscape in the morning.  The chart shows that Q1 is perhaps the most important trading quarter of the last five years. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.