Sunday, February 26, 2017

CRB Commodities Index Weekly Chart; Potential C&H; Tight Bands

Commodities are stumbling sideways for the last 8 months. There is a potential cup and handle (C&H) pattern in play (blue lines) but price is having difficulty breaking out above the brim of the cup at 192. With a base at 160 and brim at 192, a 32-handle difference, a breakout to the upside from 192 will target 224. The 224 is overhead price resistance and congestion from the summer of 2015 so that is a logical target should the breakout occur from 192.

The mini C&H in early 2016 played out in text book fashion. The base of the cup is 160 and brim at 177 so the target was 194 which was tagged in early June last year. The jury remains out on the large blue C&H.

The bottom in the CRB was an easy call in early 2016 with the falling wedge patterns, oversold conditions and universal positive divergence (green lines). The CRB was on the launch pad and it rocketed higher satisfying that brown C&H.

The ADX shows that strong multi-year donwtrend in commodities ended in early 2016. The ADX is flat down at 14 indicating that the sideways move is trendless and indecisive. The moving average lines are lining out sideways. The indicators are lining out sideways. Stochastics were overbot and neggie d (red lines) which creates the sogginess in price over the last couple weeks.

The standard deviation lines are tight with price traveling though this sideways tunnel since Fall. Price violated the upper band so it came back to touch the middle band at 190. For the bulls, the breakout above 192 is a big deal and a move above 198 and 204 would be huge where the upside 224 will be likely in the months ahead. This direction is in keeping with inflation on the rise. Economic activity will be booming, the need for raw materials will be jumping, commodity prices will be increasing, the inflation that the Federal Reserve has tried to create for the last eight years with their obscene Keynesian spending, will finally appear.

For the bears, price below 190.21 and lower portends sorrow, disinflation and lingering deflation ahead; the outcome everyone laughs off nowadays. The 50-week MA support at 186 is a big test for price then the purple line price support at 180. If the 180 fails, the economy will be slipping away into many months or a year or two of lingering deflation.

The CRB will help you determine if inflation, or deflation, is winning out going forward. Inflationists will party all night long if CRB moves above 204. Deflationists will celebrate if the CRB collapses under 180. The inflation-deflation battle lingers between 180 and 204. 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.

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