We have been noting the downtrend in the broad commodity complex for nearly a year now (after watching its breakdown a year ago), under the weight of the hawking Fed, which abruptly dropped its dovish “transitory” b/s and got with the program of fighting the inflation problem it was primary in creating.
I came this close to buying copper miner FCX today (still considering, but with patience) and as part of the process I pulled this weekly chart of the CRB index tracker, DBC. Err, not good.
This is purely a technical update, however, so that is the caveat. Technically speaking, DBC has dropped further than its 38% Fib retrace level, which is not surprising because there really is little in the way of associated support at that area. What there actually is is a lot of volume that came in and is now printing losses on those positions. Again, not good.
The next Fib level is the 50% retrace at 20.42, which has a bit of support associated but again, nothing to write home about. From a visual support perspective, the 62% retrace area looks best. Maybe that is the area that will birth the next pervasive inflation trade. If so, it could months, even a year or more away. There are a lot of “Commodity super cycle” diehards clinging to positions here.
This is just a note on the caution I gave to myself before getting too enthused about commodities. Maybe when the massively followed commodity chart guy who blocked me on Twitter for offering an alternate, polite but negative, and ultimately correct view on his gold chart suffers an appreciable loss of follower drones the correction will be over.
That is just resentful old me, a relative unknown. Truth is, the above is just a technical view and I will be ready to be bullish on commodities if given the right indications. As it stands, you know that outliers like Uranium, Lithium and REE are already of interest. But the complex as a whole, as driven by crude oil – but also base metals (not to mention some precious metals exposure) and Agricultural – is and has been bearish, with a potentially significant further decline before the next bull phase.
