Commodities breaking out

 

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.

crb

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 https://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.

8 Comments

  • Hi Keith

    What are your thoughts of an ETF which could take advantage of this, GCC (Greenhaven) or something listed in Canada or another US listed?

    Thanks for all work you post here!

    Daryn

    Reply
    • GCC is one way, or play the individual commodities via the various Horizons ETF’s. CRBQ is another one that imitates the CRB index.

      Reply
  • It’s coincidental that two of my favourite investment gurus, you and Peter Hodgson have both suffered biking accidents this season. My very best to each of you for a better summer now that you have that behind you. And it’s good to see you both are hard at work.

    Reply
    • Thanks Fred
      I am back on the road bike again, but staying off of the mountain bike for a couple of more weeks.
      Road biking is more of my passion, although I also have a long history in mountain biking–I used to race the Ontario Cup and Canada Cup races semi-seriously–not so much any more. I still try to get in a yearly tour of the west coast with my highly skilled mountain biking brother. The older I get, the more the road bike appeals to me (less injuries), and this accident has allowed me to re-visit long epic style rides through the best roads in the world –right here in Barrie Ontario (seriously, we have an unbelievable road bike venue here!).
      BTW–say hi to Peter for me, tell him to keep the rubber side down too.

      Reply
  • Keith,

    Thanks for another timely piece of analysis. What is your opinion of the ETF USCI as a way to invest in this upturn? At a minimum, it appears to be more liquid than CRBQ, if not a significantly better performer.

    Regards,

    Brian

    Reply
    • Looks like it has a bit of a different chart, more like the precious metals charts. Chart is bullish, but cant give you more insight than that

      Reply

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