On Wednesday, we laid out the case for why traders should be paying closer attention to commodities.
Today, we’ll be looking at commodities in greater detail. We’re going to try and see if the coming supercycle might already be underway…
To do so, we’ll be examining the Commodity Research Bureau Index (CRBI).
The CRBI measures the performance of a number of different commodity sectors.
Specifically, 19 commodity products make up the entire index.
These 19 commodities span the energy, agricultural, and precious and industrial metals sectors.
Although the CRBI is heavily weighted towards energy and agricultural products, it’s still an excellent overall gauge for how commodities are performing.
And right now, the CRBI is trading at upward levels we haven’t seen since August 2022.
Let’s look at a price chart of the CRBI below so you can see what I mean.
There are two important things going on with this price chart of the CRBI.
The first is how the CRBI is trading above three key moving averages (MA). They are the 20, 50, and 200-period averages.
Long-time readers will know that these moving averages do a great job of showing us the short, intermediate, and long-term trends.
When a market is trading above all three moving averages it’s a strong sign of bullish intent.
The second important point is that on April 1, the CRBI broke through the key resistance level of 290.
This level was a significant high the CRBI registered back on September 15, 2023. Immediately after establishing that high, the CRBI fell by over 11%.
Reclaiming this level is a major milestone for commodity bulls.
The combination of the CRBI trading above its key moving averages while breaking through a prior resistance level should have us on high alert.
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Traders should be on the lookout for two possible scenarios.
First, this breakout could be nothing more than a head fake. If that’s the case, we should see a sudden sell-off across multiple commodity sectors.
But the second possibility is the decline in commodities that started back in September is now over.
In that case, one commodity that traders should be looking at is natural gas.
Colleague Brad Hoppmann recently did an excellent job analyzing natural gas’ current price action.
Brad also provided some actionable insights you can use if natural gas is a sector you’d like to trade.
On my end, the next step is to dig into the individual commodities that make up the CRBI to see what other opportunities might be lying in wait.
Stay tuned for more…
Happy trading,
Imre Gams
Analyst, Market Minute