About a month ago (September 15) I posted a blog talking about how the commodity sector could be nearing a top as it tested resistance at 596.69, a level that marked the 50% retracement of the previous downtrend from 691.09 through the low of 502.28. After posting a high of 598.65 the index established a bearish crossover in weekly stochastics (bottom study) and has posted an initial test of support at 566.85, the 33% retracement of the uptrend from the longer-term low through the recent high.
Weekly stochastics and the general trade pattern of the index indicate at least another test of the initial price support, if not an extended downtrend to the 50% retracement level at 550.47. Interestingly, the weekly chart shows the area between the 33% and 50% retracement levels holding a previous consolidation phase between the weeks of July 16 and August 20.
If the continuous commodity index continues to work lower it would imply pressure in some key markets. As discussed in Saturday's blog, the soybean market is growing increasingly bearish short-term. December gold has established signs indicating that market has moved into a downtrend after testing resistance near $1,800 (see blog post from September 19). Corn seems indecisive, though has its own long-term bearish signals indicating possible increased pressure. Crude oil is a wildcard, though its recent volatility (swings of $2 to $4 per day are becoming commonplace) could be indicating an increased vulnerability to noncommercial liquidation.
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