The bulls are doing all they can to reassert control of the trend in the Bloomberg Commodity Index. They are in a good position to clear the next hurdle before a run to new highs can begin. At the same time, the relative trend has found support from which its next leg high may begin. Under the surface, Precious Metals and Agriculture are turning where they should, adding bullish fuel to Energy’s fire.

The Bloomberg Commodity Index

The Bloomberg Commodity Index is in the process of rebounding from the rising 200-day moving average. We are on record with the view that the secular trend for commodities is bullish and still in place. With the index holding the 200-day and key support at 106, it is hard to make the long-term bear case. However, we acknowledge that the near-term trend has become more complicated. Regaining broken support at 120 is an important first step in the healing process. Moving above the 50-day moving average could set the stage for a run to new highs.

As the absolute price of the index holds support and begins to turn higher, the relative trend has also found a key level. The ratio of the Bloomberg Commodity Index to the S&P 500 TR Index has pulled back to the breakout level and is beginning to stabilize. This is logical for the bulls to reassert pressure and take control again. There may be some stabilization at this level which allows the still-rising 200-day moving average time to catch up.

Within the complex, we see some signs of stabilization in the Agriculture and Precious Meal groups. Both are beginning to turn higher from support. Energy remains in consolidation while Industrial Metals are still under pressure.

Energy has done much of the heavy lifting for the commodity space in a secular uptrend. If the Ags and the Precious Metals join the party, it is hard to argue against a break to new highs.

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