A six and a half year secular cycle in the broad S&P GS Commodity index prevents me from expecting a major rally in commodities getting started until closer to 2014 year-end (Figure 1). That doesn’t rule out tradable rallies and declines before then, of course.
With last week’s breakout in crude oil and signs of a tradable low in gold, might one of those “tradable rallies” be upon the broader group? Looking at the sub-indexes, it doesn’t look like it.
Industrial metals (Figure 2) have broken a multi-year topping formation opening the door to a return to the 2009 lows.
Grains have failed in their attempt to break out of a declining trend channel and now the entire bull trend since 2010 is in jeopardy.
Softs have been dropping since March 2011 and don’t know the meaning of the word “bottom.”
Livestock is possibly the one bright spot. Sell on a break of 32.
