Commodities Summary
- The sharp pullback in most Commodities put the CRB on Neutral since Mar 18, 08 from our Buy the Dips since Jan 24, 08.
- Oil is near an exhaustion top and should put pressure on the CRB index which is now heavily skewed to Oil.
- The CRB will likely make a top of significance with Oil and head into a Summer pullback lead by Energy.
- The Bull market in Commodities is probably not complete, and should complete by 2011 like previous ones.
- Saturn in Virgo has us on alert for a possible early parabolic completion of the CRB bull market by January 2009.
Oil is putting in an exhaustion high
Oil has now reached most of my targets and a move above $127 would bring in the possibility of the $135 target on an exhaustion spike. We remain neutral, because the reversal should be swift and deep as Oil should fall quickly to $100 once a top is in place. This will likely be the first of 3 Waves down that should take Oil back down to the $70-80 range by year end, with a probable spike down to the $60's. The 5.5 month cycle has us looking for a Summer low, a Fall high and a year end low to finish the 2008 correction in Oil.
Charts courtesy of StockCharts.com
Charts courtesy of StockCharts.com
The Commodities index makes new highs before a pullback
The CRB made new highs again, pushed by Oil which is getting overdone, but also supported by Livestock, and likely to see support from the Metals and Grains group which are now oversold. We should complete the Fibonacci relationships and reach the 465 level before Oil starts its major pullback. Since the CRB is now heavily skewed to Oil, we are likely to see a Summer pullback in the CRB index as well before a Fall rally.
Charts courtesy of StockCharts.com
Charts courtesy of StockCharts.com
CRB still short of Price and Time targets for this Bull
The breakout in early 2008 above the 1981 highs is similar to the breakout in early 1979 after a pullback from 1975-1977, however the 2006-2007 pullback was shorter in both time and price and may not be over yet. We could see another decline after Oil peaks and corrects its 250% rise in the last 17 months or so, and this would make it more like the 1975-77 correction. We should then start the final wave of this Commodities Bull into the most likely window for a top near 2010-2011.
Charts courtesy of StockCharts.com
Charts courtesy of StockCharts.com
Saturn in Virgo hints we may be in the final wave already
Since Saturn is in Virgo every 30 years or so, and was in that sign for every Bull market in Commodities for the last 200 years, we should watch carefully its path in the sky now compared to 1979. We see many similarities and I have aligned the Saturn paths with Gold prices in 1978-1979 and 2007-2008 to make them more evident and to detect when the Fractal/Analog is invalidated. They both had rallies in early 1978 and early 2007 followed by Summer pullbacks, Fall rallies and end of year pullbacks in 1978 and 2007. The breakouts both came in early 1979 and early 2008, followed by a retest of the breakouts in May, and if we make new highs by Summer, then we are on track for an explosive move in Gold that could see $2,500-3,000 Gold by January 2009. If that is the case, then the CRB will also make its final Bull high in January 2009, one year earlier than expected.
Charts courtesy of StockCharts.com
Charts courtesy of StockCharts.com
Core Commodities are leading while speculative Precious Metals still lag
Industrial Metals and Energy have seen the most gains as the transfer of manufacturing to Asia creates demand for building the infrastructure required. Food has now started to move up rather sharply, and will likely continue as Livestock has not been affected yet by the rise in Grains. While Energy and Metals may correct, gains in other groups like Food and Precious Metals may compensate and gives us a shallow correction into the 8 year cycle low in 2008. If this top in Commodities is like most of the major ones, we should expect Precious Metals to become the leading group on increased speculation by the end. Take note that Commodities went up at the same rate as Equities over the last 100 years as Inflation has a wide effect over time. Silver is the best performer over this time easily beating the 1929 gains in Stocks with its sharp rise 10 years earlier in 1920. Silver repeated this feat in 1980 beating Gold and the large 2000 gains in Equities a full 20 years early.
Charts courtesy of StockCharts.com
Charts courtesy of StockCharts.com