Tuesday , July 16 2019
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Great Graphic: Did the CRB Bottom?

Summary:
The CRB index has been trending lower since late May.  It fell nearly 10% to retrace 50% of the rally come June 2017.   This Great Graphic shows the 4 1/2 month trendline.  It had been violated in late August but fell back under it at the end of last week.   On Monday, it gapped higher, above the trendline.  Today it filled the gap and rallied to new session highs.  A move above 192.00 would likely confirm a bottom of some importance is in place.  The technical readings on the weekly bar charts are more constructive than the dailies.   The commodities in the basket are mostly traded in US dollars.  Typically, then when the dollar is strong, one generally expects lower commodity prices and vice versa.  On a purely directional basis, the CRB Index and the Dollar

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Great Graphic:  Did the CRB Bottom?
The CRB index has been trending lower since late May.  It fell nearly 10% to retrace 50% of the rally come June 2017.   This Great Graphic shows the 4 1/2 month trendline.  It had been violated in late August but fell back under it at the end of last week.  

On Monday, it gapped higher, above the trendline.  Today it filled the gap and rallied to new session highs.  A move above 192.00 would likely confirm a bottom of some importance is in place.  The technical readings on the weekly bar charts are more constructive than the dailies.  

The commodities in the basket are mostly traded in US dollars.  Typically, then when the dollar is strong, one generally expects lower commodity prices and vice versa.  On a purely directional basis, the CRB Index and the Dollar Index have an inverse correlation of -0.65 over the past 60 days.  Since 2016, the inverse correlation has rarely been stronger.  This would suggest that the next move may have a weaker inverse correlation.  That is to say that a favorable near-term technical outlook for the CRB Index may not have significant implications for the Dollar Index, even if there is a small negative bias.  

Disclaimer

Marc Chandler
He has been covering the global capital markets in one fashion or another for more than 30 years, working at economic consulting firms and global investment banks. After 14 years as the global head of currency strategy for Brown Brothers Harriman, Chandler joined Bannockburn Global Forex, as a managing partner and chief markets strategist as of October 1, 2018.

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