by Michael Tarsala, CMT
The most-watched markets chart of the moment looks to be breaking down — although there’s reason to think it could possibly out-gain the S&P 500 at some point soon.
Source: Stockcharts.com
Above is the price action in the CRB Index, a broad basket of industrial and agricultural commodities. It’s also an important chart for equity investors if to watch, especially for those who own oil and gas, mining and agricultural stocks.
The thin blue line is the point at which folks had been hoping for a turnaround. As of today, it’s broken down below it.
“I haven’t noticed any upward momentum in the commodity space at all, as oil, gold, silver, you name it continue lower,” said Gerry Sparrow, manager of the Hard and Soft Commodities model. “The headlines about Greece are dominating the market, and that needs to be straightened out first.”
Sparrow is keeping 99% of the portfolio in SPRD Gold (GLD) right now, which tracks the gold market. He sees it as a defensive move against a negative fundamental backdrop.
The GLD may begin to bounce, “any day”, he says.
Yet here’s another chart to keep an eye on:
Source: Stockcharts.com
What you see above is the CRB charted relative to the S&P 500. It’s been in a steep downtrend since last September, as stocks have been the far better performer.
You’ll also notice an oversold RSI reading, as well as a MACD indicator (at bottom) that may be turning around soon.
No one’s expecting it, given the CRB breakdown and all the negative headlines.
But the CRB/SPX chart is telling us to keep an eye out for the possibility that at some point soon, commodities could start to outperform the stock market if we were to see a high-volume move to the upside.
