CRB Index Technical Analysis Report

CRB Index

The CRB index went past the Sept high due to the recent rally in crude prices. For a while I have maintained that crude will see a dip before a rally. The dip did not last but the new highs are now causing metals to resume the rally. The question on the back of the mind is whether the larger wave C/3 rally has started already?. Crude did not look impulsive in the initial phase of the move up but was making higher tops and bottoms. So that takes me to the CRB index that has a different look. This index has 2 clear 5 wave rallies that I interpreted as a-b-c and was expecting a dip but with the hights taken out the bullish alternate is to consider 1-2-1-2-3 as an alternate which means that there is a lot more steam in the CRB commodity index and thus the whole space. The base metal prices after the recent correction have started giving buy signals again so clearly something else could be at work. The bull run in metals may resume again as prices take off to new territory. Have covered Lead today but will cover the others like Aluminium and Nickel that are showing possible bullish outcomes. Copper is lagging behind as usual along with Zinc. Gold and Silver often work opposite to the base metals but eventually catch up so for now they are still correcting. The daily chart of the CRB index parallel channel now goes to 200 as the next potential target.

Now you should also appreciate the big picture. The CRB index in wave 2 dipped to a 70.7% retracement. If wave 3 has started it should go to the upper end of its channel but may also test the falling trendline from the 2008 high. While most people cannot imagine a bull market in commodities coming back, with the bear market in the dollar this is exactly what you might get. So expect targets on the upside to overshoot in commodities. This will have a direct bearing on commodities prices. I will not be surprised if the falling trendline is eventually surpassed. The reasons are a combination of coming supply tightness and the other purely past monetary actions. Both have been overlooked by the markets due to the crash in prices in the wake of the rising dollar despite years of growth in GDP and expansionary policy. The big turn might have started sooner than most are expecting.

Technical Analysis of CRB Index, DOW, NASDAQ, BSE 200 And DAX

CRB Index
The CRB Index of commodities is now tracking higher with Oil and base metals. Only the PMs are lagging behind. While it is possible to imagine that Crude is still in wave B as a triangle, the CRB index that mostly reflects energy looks like it maybe done. The recent bottom involved a 66% retracement in price [blue line] and a weekly RSI of 29. Wave C up should not only carry to the wave A high but go past the grey trendline that marks the 2009 lows to rule out the case for new lows first in the index and oil as some are anticipating. My markings can change to 1-2-3 but even conservatively we should go in wave C to the upper end of the channel near 215 [current 178]

BSE 200

Is it possible to count the rise from 2009 as 5 waves? I usually take 2008-2013 as a triangle. But if I go by all the impulse wave markings of the street for each rally since 2009 it can be done as 9 legs are complete. In 2015 when I called the market top I used the Arithmetic scale chart of the BSE 200 or broader indices to project that the upper end of the channel was reached and we may go to the lower end. After 12 months down a move up started that after 2 years and adding 4 more waves [yellow extention] has brought us back to the upper end of the channel on the arithmetic scale. So it is a key resistance zone as much as given the number of waves completing the blow markings show we have 5+4=9 waves that can be marked as complete 5 waves with a 3rd wave extended for the long term 5th wave [circle]. Let us see what unfolds here.

NASDAQ 100

The Nasdaq 100, a year back among the many alternates I considered was a triangle for 2015-2016. Going back to that it changes the outlook for the Nasdaq near term. Wave 5 up would have only started. The upper trendline of the highs goes to 6080-6100.

DOW

Dow – wave 5 is extending, we are now in wave v of 5 and that is also subdividing. 21340 is the lower trendline and till it does not break we can go to 21800.

DAX – leading the way for Europe

Unlike US stocks that are stretching out in wave 5 higher, the European indices have 5 wave declines. It shows up very clearly in the German DAX. It recently bounced back in 3 waves to almost 61.8%. Yesterday it fell below the b wave low confirming that the bounce was corrective and maybe wave 3 down to  12060

 

Adam Smith Associates offers trade & commodity finance related services & solutions to its domestic and international clients. Views expressed in this article are purely of the author – Mr Rohit Srivastava – a leading technical analyst. Visit www.adamsmith.tv for services offered by Adam Smith Associates Pvt Ltd