Charts of the Week: Commodity Correction Likely Still in Progress

May 23rd, 2011
in contributors

    by Erik McCurdy

In late April, chart analysis suggested that the development of a violent retracement in commodities was becoming more likely. In early May, the extremely overextended rally broke well below long-term uptrend support on the weekly chart, signaling the beginning of the anticipated correction.

Follow up:

 

Although the Continuous Commodity Index (CCI) has now declined 7% from the long-term high in April, it is highly unlikely that the correction is over. The rally from mid-2010 was an extreme move that resulted in a gain of 53% during the course of 10 months and the developing breakdown on the monthly chart suggests that additional losses are likely before the next meaningful rebound occurs.

A monthly close well below support at the lower boundary of the power uptrend from June 2010 near 670 would constitute a confirmed breakdown and predict a return to long-term uptrend support near 567 during the next few months. Watch the close on Friday for this potentially important confirmation.

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  Erik McCurdy is the senior market technician for Prometheus Market Insight and has been analyzing charts every day for over 15 years. The software program that he developed to monitor long-term stock market trends has correctly predicted over 90% of the long-term turning points in the S&P 500 index since 1940. His Gold Currency Index has predicted every major trend change in the US gold market since its creation in 2005. The Prometheus Market Insight newsletter service provides daily, weekly and monthly forecasts for stocks, bonds, currencies, commodities and precious metals using proven computer models that base their predictions on technical and cycle analysis.  Stay in touch:  Email:  erikmccurdy@econintersect.com















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