The CRB index appears to have broken out of a large symmetrical triangle. Its consolidating at this moment, but should the formation carry forth, we can look for a target of around 400 on that index. The traditional method of measuring a potential move out of a triangle is to measure the widest part of that triangle and project that measurement forward upon a breakout. The logic behind such a measurement is that prior volatility or rise on the market could return to the same levels it had reached in the past if the news causing a breakout is significant. As you will note on my chart below, the CRB index moved from 250 to 370 in 2011. That’s about 120 points. Measuring the breakout from 285 in March of this year, we can easily project 400 (405 to be exact) for a potential target.
Quite a bit of the CRB’s movement will depend on energy. About a third of the index is comprised of energy-related commodities. The index comprises 19 commodities: Aluminum, Cocoa, Coffee, Copper, Corn, Cotton, Crude Oil, Gold, Heating Oil, Lean Hogs, Live Cattle, Natural Gas, Nickel, Orange Juice, Silver, Soybeans, Sugar, Unleaded Gas and Wheat. I blogged on oil recently at http://www.valuetrend.ca/?p=3008
As noted on that blog, the chart formation for oil is bullish, but there are some political uncertainties to be aware of.