Swing Trading Strategies & Stock Picks Since 2003

There is a multi-swing positive momentum divergence and perhaps a new set of higher highs and higher lows developing in the CRB (Commodity) Index - but might this lead to a reversal in price?  Let’s look:

$CRB Commodity Index Daily:

We have a confirmed and persistent downtrend in price as evidenced by lower lows and lower highs as well as the “most bearish orientation” possible for the key daily EMAs.

However… there has been subtle, recent potential strength in the index off the December ‘08 lows.  If you look closely, price failed to exceed the falling 20 day EMA (which happened at least four times in the recent past) but price formed a higher swing low at the end of December and then pushed to a new swing high at the resistance from the falling 50 day EMA.

Generally, this is a pattern that forms when a market is shifting its trend and consolidating, or building a base.  Price will break initial resistance and reverse at the next resistance, which is the 50 EMA, fall again, and then attempt to break it on the next swing up.  We got the swing down and if we hold the $220 index level, we will have confirmed a second higher low and set-up a break of $240 to be the official “Sweet Spot” or Trend Reversal Zone.

If that is the case, then we would have to shift the bias - at least on the daily timeframe - back to the upside, meaning gold, oil, and agricultural commodities (see each market’s individual chart) might be putting in at least a short-term or temporary bottom for a decent-sized retracement of the prior violent down-move since July.  You’ll need to set upside Fibonacci targets if that is the case.

If we do break $240, a minimum target would be the falling 20 week EMA which is currently situated at $270, and we might get there quick if a break occurs.

The next confluence resistance zone would come in at $311, which would be the 38.2% Fibonacci retracement of the July peak to December low and also near the falling 50 week EMA.

However, if we break beneath $210 any time soon, any upside target would be off the mark.

Continue watching the CRB and major commodities very closely - we may be in for a surprise.