Technically Speaking

In the past I've shown weekly charts for the Continuous Commodity Index (CI.X), but as a tie-in to my Tuesday On the Market column (The Rise and Fall) I wanted to show the major (long-term) trend of the commodity sector. And as you can see on the monthly chart, this major trend remains down.

According to the CI.X, the commodity sector peaked back in March 2011 when the index established a bearish key reversal. This pattern consists of the market (or index) moving to a new high, taking out the previous month's low, and closing lower for the month. And even though the CI.X went on to establish another high the following month, the long-term reversal pattern remained in effect.

Since then the CI.X has consistently moved lower, establishing a low monthly close of 508.76 in May 2012. Notice that this is a test of the 50% retracement level of the previous uptrend from the low of 322.53 through the April 2011 high of 691.09. After sliding to a low of 502.28 in June 2012 the index rallied to a high of 598.65 in September 2012. Also note that this is a test of another 50% retracement level, this time of the downtrend from the March 2011 high through the June 2012 low.

However, after reaching this resistance level the CI.X has resumed its downtrend and looks to be headed back to support near 506.81. This would imply that many of the key commodities that make up the index (gold, crude oil, etc.) could continue to see pressure as well.

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